Fatima is buying a home in Lansing and her purchase agreement includes a financing contingency specifying a 30-year conventional loan at no more than 7% interest. Her lender approves her for a 30-year conventional loan but at 7.5% interest. Fatima wants to void the contract and recover her earnest money. Which statement best describes her position under Michigan contract law?
Correct Answer
A) Fatima may void the contract because the loan terms do not match the contingency specifications
A financing contingency in a Michigan purchase agreement specifies the exact loan terms the buyer is seeking, including loan type, term, and maximum interest rate. If the buyer cannot obtain a loan commitment meeting all specified terms — including the maximum interest rate — the contingency has not been satisfied. Since Fatima's contingency specified no more than 7% and she was only approved at 7.5%, the contingency terms are not met, and she may properly void the contract and recover her earnest money.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
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.
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