Sarah and Tom sign a Maryland Contract of Sale for a home listed at $450,000. The contract includes a financing contingency stating that if Sarah cannot obtain a mortgage commitment within 21 days, either party may void the contract. On day 18, Sarah's lender denies her loan application. Sarah notifies Tom in writing and requests return of her earnest money deposit. Under Maryland contract law, which of the following best describes the outcome?
Correct Answer
B) Sarah is entitled to a full refund of her earnest money because the financing contingency was not satisfied
Under Maryland contract law, a financing contingency is a condition precedent to the buyer's obligation to perform. When the contingency is not satisfied within the specified timeframe and the buyer provides timely written notice, the contract is voidable and the buyer is entitled to a full refund of the earnest money deposit. Sarah notified Tom on day 18, within the 21-day window, so the contingency was properly invoked.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
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.
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