Angela and her husband make an offer on a Knoxville property. Their offer includes a financing contingency specifying a conventional loan at no more than 7% interest. The lender approves them but only at 7.5% interest. Angela wants to terminate the contract and recover her earnest money. Which of the following best describes her position under Tennessee law?
Correct Answer
D) Angela may terminate and recover her earnest money because the loan approval did not meet the specific terms stated in the financing contingency
In Tennessee, a financing contingency is enforceable according to its specific terms. If the contract specifies that the buyer must obtain financing at no more than 7% interest and the lender only approves the loan at 7.5%, the contingency has not been satisfied. Angela may properly invoke the contingency, terminate the contract, and recover her earnest money because the loan approval did not conform to the contractually specified terms.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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