David and Karen are purchasing a home in Eden Prairie, Minnesota. The purchase agreement includes a financing contingency stating the buyer must obtain a written mortgage commitment at a specified interest rate within 15 days. On day 16, the buyer's lender issues the commitment at a slightly higher rate than specified. The seller claims the contingency has expired and the buyer must proceed. What is the most accurate statement of the buyer's position under Minnesota contract law?
Correct Answer
B) The buyer may cancel the contract and recover earnest money because the commitment did not meet the exact terms of the contingency
A financing contingency in a Minnesota purchase agreement is a condition that must be satisfied exactly as written. If the buyer did not receive a written mortgage commitment at the specified interest rate within the specified 15-day period, the contingency condition was not met. The buyer may properly cancel the contract and is entitled to recover earnest money, because the lender's commitment at a higher rate does not satisfy the specific terms negotiated in the purchase agreement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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