A buyer and seller in St. Cloud, Minnesota enter into a signed purchase agreement. The agreement contains a contingency stating that it is subject to the buyer obtaining financing at an interest rate not to exceed 7.5% within 21 days. On day 19, the buyer's lender offers a loan at 7.75%. The buyer decides to waive the contingency and proceed with the purchase. The seller then refuses to close, claiming the buyer's waiver is invalid. Under Minnesota contract law, which of the following is MOST accurate?
Correct Answer
A) The buyer is correct; a contingency that exists solely for the buyer's benefit may be waived by the buyer
Under Minnesota contract law, a contingency that exists solely for the benefit of one party may be waived by that party alone without the other party's consent. A financing contingency is designed to protect the buyer — it allows the buyer to exit the contract if they cannot obtain acceptable financing. Because the contingency benefits only the buyer, the buyer may choose to waive it and proceed with the purchase even at a higher interest rate, binding themselves to the contract. The seller cannot use the buyer's financing contingency as a basis to escape the contract.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
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.
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