Maria submits a purchase agreement on a Minneapolis home for $385,000 with a financing contingency requiring her to obtain a 30-year conventional mortgage at no more than 7% interest. Her lender approves her for a loan but only at 7.5% interest. Under Minnesota contract law, what is Maria's most likely right?
Correct Answer
B) Maria may cancel the contract and recover her earnest money because the loan terms do not match the contingency
Under Minnesota purchase agreement practice, a financing contingency specifies the loan terms (amount, type, and maximum interest rate) that the buyer must be able to obtain. If the lender only approves the buyer at terms that do not match the contingency—here, 7.5% rather than the specified maximum of 7%—the contingency has not been satisfied. Maria may therefore cancel the contract and is entitled to a full refund of her earnest money. The contingency was not met, so she is not in default.
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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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