ContractsIntermediateDelaware Exam

A buyer's offer of $400,000 includes an inspection contingency allowing the buyer to withdraw if inspection reveals defects costing more than $5,000 to repair. The inspection reveals $6,000 in needed repairs. The buyer may:

ANot withdraw because the contract is binding

BWithdraw from the contract under the contingencyCorrect

CWithdraw only if the seller refuses to repair

DWithdraw only with the seller's written approval

Why Withdraw from the contract under the contingency Is Correct

Answer B: Withdraw from the contract under the contingency

Because the inspection revealed defects costing more than the contingency threshold of $5,000, the buyer satisfies the contingency condition and may withdraw from the contract and recover earnest money.

Exam Tip: Contracts

Contract questions frequently test the essential elements required for a valid contract. Remember: competent parties, mutual consent, lawful object, and sufficient consideration. Watch for void vs. voidable distinctions.

Key Contracts Terms in This Question

Earnest Money

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

Contingency

A condition in a purchase contract that must be satisfied before the sale can proceed to closing.

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Key Terms to Know

Fee Simple

The highest and most complete form of property ownership — absolute ownership with the right to use, sell, or pass the property to heirs.

Life Estate

A freehold interest in real property that lasts only for the duration of a specified person's life.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Easement

A non-possessory right to use another person's land for a specific purpose.

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