Linda is selling her home in Rochester, Minnesota. The buyer submits a purchase agreement with an inspection contingency. After the inspection, the buyer requests that Linda repair a cracked foundation wall. Linda refuses. The buyer then sends a written notice canceling the contract within the contingency period. Under Minnesota law, what happens to the earnest money?
Correct Answer
C) The earnest money is returned to the buyer because the contract was canceled within the contingency period
When a buyer properly exercises a contingency (such as an inspection contingency) and cancels the contract within the specified contingency period according to the terms of the purchase agreement, the buyer is entitled to a full refund of earnest money. The contingency clause protects the buyer's right to exit the contract without penalty if the conditions are not met, and Linda's refusal to repair does not cause the buyer to forfeit the deposit.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
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