What is the effect of a financing contingency in a Maine purchase and sale agreement if the buyer cannot obtain a loan?
Correct Answer
B) It allows the buyer to cancel the contract and receive a full refund of their earnest money
A financing contingency allows the buyer to cancel the contract and receive a full refund of their earnest money if they are unable to obtain financing under the specified terms. It protects the buyer from losing their deposit due to circumstances outside their control. Without this contingency, a buyer who fails to secure a loan could forfeit their earnest money for non-performance.
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Related Topics & Key Terms
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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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