A purchase agreement for a rural Stearns County property includes an SSTS (subsurface sewage treatment system) contingency. The county-required compliance inspection reveals the septic system is non-compliant and must be replaced at an estimated cost of $18,000. The buyer and seller cannot agree on who will pay for the replacement. The buyer cancels the contract within the contingency period. Which statement correctly describes the handling of the earnest money?
Correct Answer
C) The buyer is entitled to a full refund of the earnest money because the SSTS contingency was properly exercised
Under Minnesota law (Minn. Stat. § 115.55) and standard purchase agreement practice, an SSTS contingency protects the buyer if the septic system is found to be non-compliant. When the buyer properly cancels the contract within the contingency period due to a failed compliance inspection, the buyer is entitled to a full refund of the earnest money. The inability to reach agreement on repair costs is precisely the scenario the contingency is designed to address.
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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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