Contingencies & Conditions

What We'll Cover

• What is a Contract?
• Contract Requirements
• Meaning of Contingencies
• Purpose of Contingencies
• Types of Contingencies
• Examples of Problem Contingencies
• How to Draft Good Contingencies

What is a Contract?

Components of Contracts

• Offer
• Acceptance
• Mutual Assent
• Consideration

Counteroffers

Oral vs. Written Contracts

Statute of Frauds

• Agreement to Pay Debt of Another
• Sale of Real Estate
• Prenuptual Agreements
• Real Estate Broker Contracts
• Agreements to Lend Money

What Can Invalidate a Contract?

• Misrepresentation
• Mistake
• Duress
• Unconscionable Terms

Capacity

• Minors
• Mentally Incompetent
• Statutory Incapacity

Parol Evidence

Implied Promise

Time in Contracts

Contingencies

"Certain to Occur"?

Affirmative vs. Negative

Fulfilling Contingencies

Express v. Implied

Common Contingencies

• Financing
• Appraisal
• Zoning
• Kick-out Clause
• Tenants

Standard Contingent Right to Purchase

Why Do We Use Contingencies?

Conditional Language

• "on condition that"
• "subject to"
• "provided that"
• "if"

Bill Buyer is interested in buying land to build subdivision. Sarah Seller owns land that is zoned for agricultural use. She has submitted a rezoning application.

No. 1 - "Buyer agrees to purchase Seller's Property for $300k"

No. 2 - "Buyer's obligation to purchase is conditional upon the grant of the rezoning application within 60 days"

No. 3 - "Buyer will pay $500k if zoning application is approved in 60 days, otherwise Buyer shall pay $200k"

No. 4 - "Buyer will make good faith effort to rezone property"

Cases

• Austin v. Trybus - Attorney Approval Contingency
• Builders v. Merritt - Feasibility Study Contingency
• Campbell v. Melton - Repair Contingency
• Christy v. Premo - Notice Contingency

More Cases

• Connor v. Cal-AZ Prop - Appraisal Contingency
• Funke v. Paist - Sale of Existing Home Contingency
• Loeb v. Gray - Natural Resources Contingency
• Marsh v. Rheinecker - Terminate Damage Contingency

Examples

Drafting Contingencies

• Determine Client's Desires
• Use as Few as Possible
• Diagram the Possibilities

Your Client Wants:

• Her attorney to approve
• A survey to confirm acreage
• Use proceeds from sale of existing property