New York Real Estate Salesperson ExaminationContractsHard
A buyer enters into a purchase agreement for a commercial property. The agreement specifies that the buyer must obtain financing within 30 days. If the buyer fails to secure financing within this timeframe, and the contract states it becomes void, what type of contract condition was this?
- ACondition subsequent
- BConcurrent condition
- CExpress condition
- DCondition precedent
Show answer & explanationAnswer & explanation
Correct answer: D. Condition precedent
A condition precedent is a condition that must be satisfied before the contract becomes enforceable or before a party's performance is due. In this case, obtaining financing is a condition that must occur before the buyer is obligated to complete the purchase.
Why the other options are wrong
- A. A condition subsequent terminates an existing obligation or contract upon the occurrence of an event.
- B. Concurrent conditions occur simultaneously, such as paying and receiving title at closing.
- C. While it is an express condition, 'condition precedent' is the more precise legal classification of its effect.
Condition Precedent
A condition that must be met or occur before an obligation under a contract becomes enforceable or before the contract itself becomes binding.
- Precedes the obligation.
- If not met, obligation may be excused.
- Example: 'subject to financing'.
Memory trick: Pre-cedent: Before the event. Sub-sequent: After the event.