Synopsis of Rule of Law. Where a term is vague and it is impossible to ascertain the parties’ intentions, a contract must fail for indefiniteness.
A subject to financing clause creates a condition precedent to the buyer's performance.View Full Point of Law
Issue. Was the “subject to financing” term vague to the point of rendering the parties’ contract void for indefiniteness?
Yes. Plaintiff argued that Defendants could have obtained financing by accepting the proffered $45,000 loan. The court found that the parties’ intentions related to the “subject to financing” term could not be made certain by the surrounding circumstances. Specifically, the court could not determine whether the clause gave Defendants the exclusive option to determine the proper amount of financing, or whether Defendants should have accepted Plaintiff’s offer to finance. Accordingly, the court could not interpret what the parties mutually meant by the “subject to financing” term and therefore held the contract void for indefiniteness.
Discussion. Clauses related to efforts by the purchaser to secure adequate financing, not resolved at the time the contract was signed, often result in litigation.