A Purchase and Sale Agreement for a home in Olympia includes a financing contingency stating that the buyer must obtain loan approval within 21 days. On day 19, the buyer's lender denies the loan. The buyer immediately notifies the seller in writing and requests return of the $8,000 earnest money. Under Washington law, what is the most likely outcome?
Correct Answer
D) The buyer is entitled to a full refund of the earnest money because the contingency was not satisfied
A financing contingency is a condition precedent in the Purchase and Sale Agreement. When the buyer is denied financing within the contingency period and provides timely written notice, the condition has failed through no fault of the buyer. Under Washington contract law, the contract is voidable by the buyer and the earnest money must be refunded in full. The contingency clause specifically protects the buyer's deposit in this scenario.
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Related Topics & Key Terms
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Related Concepts
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
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.
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