In a Texas real estate transaction, the buyer deposits $20,000 in earnest money and pays a $500 option fee. After the option period, the buyer discovers they cannot qualify for financing but did not include a Third Party Financing Addendum in the contract. The buyer wants to terminate. Under the contract:
Correct Answer
D) The buyer may be in default because the option period has expired and no financing contingency exists
Without a Third Party Financing Addendum providing a financing contingency, the buyer has no contractual right to terminate based on inability to obtain financing. If the option period has expired, the buyer may be in default if they cannot close.
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Related Concepts
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.
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.
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