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CHAPTER 22

Executory Period Issues

    INTRODUCTION

Not all sales contracts are closed. The contract itself may condition the parties' obligation to close. A party's failure to satisfy a sales contract condition allows the other party to rescind the contract without liability, and in some cases allows the party not meeting the condition to rescind. For example, a clause may allow the buyer to rescind the contract after consulting with an attorney. A common condition, known as the “subject to financing” clause, conditions the buyer's obligation to close on securing a loan commitment under suitable terms, including the amount, repayment schedule, and maximum interest rate. Those terms that are “suitable” are often included in the contract: a maximum interest rate, minimum term for the loan, and maximum monthly payment are often included. Implied in this clause is the buyer's obligation to make a reasonable effort to obtain a commitment. Other clauses may condition the closing on the buyers' selling their current residence, on a third-party inspection of the property, on its rezoning, on an appraisal or other report (e.g., a termite inspection report), or on the seller's removing a mortgage or other lien from its title.

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