A Michigan purchase agreement contains a financing contingency with a deadline of October 15. The buyer fails to obtain financing and does not notify the seller before October 15. On October 17, the buyer informs the seller they cannot get a loan and demands the return of their earnest money. The seller refuses. Under Michigan contract principles, which party is most likely correct?
Correct Answer
C) The seller, because the buyer waived the financing contingency by failing to exercise it before the deadline
In Michigan, a contingency is a contractual right that must be affirmatively exercised within the specified timeframe. If the buyer fails to notify the seller that the contingency has not been met before the contingency deadline, the contingency is generally deemed waived. Once waived, the buyer is bound by the contract, and failure to proceed can result in forfeiture of the earnest money. The seller is correct that the buyer's failure to act before October 15 constitutes a waiver of the financing contingency.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
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.
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