A New York buyer signs a purchase contract with a financing contingency requiring a 'conventional loan at prevailing market rates.' Market rates increase by 1.5% between contract signing and the loan application deadline. The buyer obtains a loan commitment at the higher current market rate but claims the contingency is not satisfied because rates increased. Which statement is correct?
Correct Answer
D) The contingency is satisfied because the loan meets current prevailing market rates
When a financing contingency references 'prevailing market rates' without specifying a rate or date, it refers to the rates available at the time the loan commitment is sought, not the rates at contract signing. The buyer obtained financing at current market rates, satisfying the contingency.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
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.
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Previous Question
A purchase contract in New York includes a clause stating 'Seller warrants that all systems and appliances will be in working order at closing.' Two days before closing, the furnace breaks down and requires $2,500 in repairs. The seller refuses to fix it, claiming normal wear and tear. How should this situation be resolved?
Next Question
A buyer in New York wants to include a clause allowing them to cancel the contract if they cannot sell their current home within 45 days. This type of provision is commonly known as a: