Question

The Ahmed family have signed a contract to buy the Miller family's home. However, the contract states the Ahmeds must first close on the sale of their current home within thirty days. If this closing does not occur, the contract is no longer binding for either party. Which contract term applies?

A) Novation
B) Option
C) Contingency
D) Assignment

Answer 1

C, contingency

Step-by-step explanation:

A contingency contract is one in which a contract is based on conditions that requires certain actions for specific result/outcome. The contract can be called a if-then contract also. This means that if a party involved in the contract takes a particular action, the other party of the contract will also take an action that becomes an outcome.

From the above question, if the Ahmed family can close sale on their own home, then they can buy the Miller's home.

In the event that the Ahmed family does not fulfill the condition of closing the sale on their home, the Millers might not close the sale of their home to the Ahmed family as the contract is not binding on any of them.

Cheers.