Humber/Ontario Real Estate Course 2 Exam Practice

Which of the following is accurate concerning conditions in agreements of purchase and sale?

1. Any condition written as a true condition precedent for the buyer can be redrafted as a condition subsequent, as the seller will always be assured that the condition cannot be waived.

2. When a buyer's offer contains a condition subsequent, a waiver clause must also be included with the condition, as it allows the condition to be waived rather than fulfilled.

3. When an offer is accepted that includes a condition subsequent allowing the buyer to arrange mortgage financing, the agreement is a binding contract but the condition allows the buyer to terminate that contract within a stated time period.

4. If a buyer is assuming an existing mortgage that is subject to mortgagee approval, the condition must be written in the condition subsequent format in order to ensure that the buyer fulfills the condition.

5. Conditions subsequent always protect the seller more than the buyer.

6. Conditions subsequent must be explicitly agreed upon by both parties before any offer.

The correct answer is: When an offer is accepted that includes a condition subsequent allowing the buyer to arrange mortgage financing, the agreement is a binding contract but the condition allows the buyer to terminate that contract within a stated time period.

Option C is the correct answer because it accurately reflects how the condition subsequent related to mortgage financing works in an agreement of purchase and sale. In real estate transactions, when an offer is accepted with a condition subsequent allowing the buyer to arrange mortgage financing, the agreement becomes a binding contract. However, the condition subsequent gives the buyer the option to terminate the contract within a stated time period if they are unable to secure the necessary financing. Options A, B, D, and E are incorrect: - Option A is incorrect because conditions precedent and subsequent have distinct legal implications, and they cannot be interchanged as suggested in the statement. The seller's assurance that a condition cannot be waived does not justify changing the nature of the condition itself. - Option B is incorrect because a condition subsequent does not require a waiver clause. A condition subsequent automatically terminates the contract if the specified condition is not met within the stated time frame. - Option D is incorrect because assuming an existing mortgage subject to mortgagee approval would typically be set as a condition precedent rather than a condition subsequent to ensure that the necessary approval is obtained before finalizing the sale. - Option E is incorrect because conditions subsequent can protect both parties depending on the specific terms outlined in the agreement. The protection offered is not biased towards only the seller. - Option F is also incorrect because conditions subsequent do not necessarily need explicit agreement from both parties before any offer is made. They are typically included in the offer itself and become part of the binding contract once accepted.