Robert enters into a purchase and sale agreement to buy a property in Lexington, Massachusetts. The agreement contains a mortgage contingency with a deadline of August 1 and states that if Robert fails to obtain a mortgage commitment by that date, the seller may retain the deposit as liquidated damages. On July 30, Robert's lender verbally informs him that his loan is approved, but the written commitment letter is not issued until August 3. The seller claims the contingency was not satisfied and attempts to retain the $20,000 deposit. Robert argues the verbal approval before the deadline satisfies the contingency. Under Massachusetts law, which outcome is most likely?
Correct Answer
C) The seller prevails because the standard Massachusetts mortgage contingency requires a written mortgage commitment, and verbal approval does not satisfy this requirement
Under Massachusetts real estate practice, a standard mortgage contingency clause specifically requires a written mortgage commitment by the stated deadline. A verbal approval from a lender — even if made before the deadline — does not constitute a written mortgage commitment and therefore does not satisfy the contingency. The written commitment is a formal document from the lender that commits to fund the loan under specified terms. Because Robert did not receive the written commitment until August 3, two days after the August 1 deadline, the contingency was not satisfied, and the seller is entitled to retain the deposit as liquidated damages under the terms of the purchase and sale agreement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
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