Florida Real Estate Broker ExaminationReal Estate Law and RegulationsEasy
A Florida real estate broker is drafting a purchase agreement for a buyer client. The property is located in an area known to have a high water table, and the buyer is concerned about potential flooding. The broker includes a clause stating that the contract is contingent upon the buyer obtaining flood insurance at a premium not exceeding $1,500 per year. This type of clause is best described as:
- AA specific performance clause.
- BA disclaimer clause.
- CA contingency clause.
- DA 'time is of the essence' clause.
Show answer & explanationAnswer & explanation
Correct answer: C. A contingency clause.
A contingency clause makes the validity of the contract dependent on the fulfillment of a specified condition or event. In this case, the condition is obtaining flood insurance at a certain premium.
Why the other options are wrong
- A. A specific performance clause allows a party to sue to force the other party to fulfill the contract terms.
- B. A disclaimer clause attempts to limit liability or disavow a warranty.
- D. A 'time is of the essence' clause emphasizes that contractual deadlines must be strictly met.
Contingency Clause
A provision in a contract that makes the contract's validity or a party's obligation dependent on the occurrence or non-occurrence of a specified event or condition.
- Protects a party from unforeseen circumstances.
- Must be clearly stated in the contract.
- Failure to meet a contingency can allow contract termination without penalty.
Memory trick: Clauses are 'pieces' of the contract puzzle.