Paul offers to buy Mary\'s house for $400,000 but conditions his offer on his ab
ID: 419593 • Letter: P
Question
Paul offers to buy Mary's house for $400,000 but conditions his offer on his ability to obtain a 30 year fixed mortgage at a rate no higher than 4.75%. Mary accepts the offer. John makes a diligent and good faith effort to obtain an appropriate mortgage, but is unable to get a 30 year fixed mortgage at a rate less than 5.25%. As a result, Paul does not buy the house. Mary Sue's Paul for breach of contract. Select one:
a. Paul is not liable because Paul and Mary did not create an enforceable contract.
b. Paul is liable because there was an enforceable contract between Paul and Mary and Paul failed to perform.
c. Paul is not liable because his obligation to purchase was conditional and the condition was never satisfied.
d. Paul is liable because his breach is material. e. Paul is liable because he had a contractual obligation to perform.
Explanation / Answer
c) Paul is not liable because his obligation to purchase was conditional and the condition was never satisfied.
Though there was no legal contract, but Paul and Mary had an oral agreement which is as valuable as legal contract. Paul while doing the agreement gave some conditions and after hearing the conditions only Mary accepted the offer. Paul had a contingency in the agreement. So, in this case Paul is not actually liable. Hence, this is the correct option.
Other options a, b, d and e are not correct.
Its because Paul and Mary never had any written legal contract. Paul is not contractual obligized as he didn't breached any agreement, besides he put contingency while making an oral agreement.
Hope this helps :)