Contracts
A contingency in a purchase contract:
AMakes the contract void automatically
BIs a condition that must be satisfied for the contract to become binding✓ Correct
CTransfers all risk to the seller once the contract is signed
DAllows the seller to back out without penalty at any time
Explanation
A contingency is a condition precedent — a specific event or condition that must occur before the parties are legally obligated to complete the transaction. Common contingencies include loan approval, property inspection, and appraisal. If a contingency is not satisfied, the affected party may cancel the contract.
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