Contracts
In a California residential purchase agreement, what is a 'contingency'?
AAn automatic extension of the closing date
BA condition that must be satisfied for the contract to become binding✓ Correct
CA penalty imposed for late performance
DA mandatory disclosure required by the DRE
Explanation
A contingency is a condition in the contract that must be satisfied (or waived) before the contract becomes fully binding. Common contingencies include financing, inspection, and appraisal. If a contingency cannot be met, the buyer may cancel without penalty.
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