Contracts
In Texas, a 'contingency' in a real estate contract is a condition that must be met for the contract to remain binding. If a contingency is NOT met, the general consequence is:
AThe contract automatically becomes binding without the contingency
BThe party protected by the contingency may terminate the contract without penalty✓ Correct
CBoth parties are automatically in default
DTREC arbitrates the matter
Explanation
A contingency protects the party it is designed for. If the condition is not met (e.g., the buyer cannot obtain financing, the inspection reveals serious defects), the protected party typically has the right to terminate the contract and receive their earnest money back without being in default. They may also waive the contingency and proceed.
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