A buyer in Springfield, Massachusetts includes a mortgage contingency clause in her Purchase and Sale Agreement, specifying that she must obtain a commitment for a 30-year fixed mortgage at no more than 7% interest within 21 days. On day 22, she has not obtained financing and notifies the seller she is exercising the contingency. The seller argues the contingency deadline has passed. Under Massachusetts law, what is the most likely outcome?
Correct Answer
D) The seller is correct; because the buyer failed to act within the 21-day period, the contingency has expired and the buyer is in default
Under Massachusetts contract law, contingency deadlines in a Purchase and Sale Agreement are binding on the parties. If the buyer fails to exercise a mortgage contingency within the specified time period (here, 21 days), the contingency expires. The buyer cannot exercise an expired contingency to cancel the contract without penalty. The seller's position is correct: the buyer missed the deadline and is in default, potentially forfeiting the deposit.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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