David is purchasing a home in Edina under a purchase agreement that contains a financing contingency but no inspection contingency. After the financing contingency deadline passes without cancellation, David's inspector discovers significant foundation damage. David wants to cancel the contract. The seller refuses and threatens to retain the earnest money. Which statement most accurately describes David's legal position under Minnesota law?
Correct Answer
C) David has limited options because he did not include an inspection contingency, and the financing contingency has been waived; he may be liable for earnest money if he does not close
David's situation illustrates the critical importance of including an inspection contingency. Because no inspection contingency was included in the purchase agreement and the financing contingency deadline has passed without cancellation, David has no clear contractual right to cancel based on the inspection findings alone. Without a valid contingency to invoke, David risks being in default if he refuses to close. His only potential avenue would be to prove fraud or intentional concealment by the seller under the Minnesota Residential Property Disclosure Act (Minn. Stat. § 513.52), which is a much higher legal bar than simply exercising a contingency.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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