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Contingency

Contingency

A condition that must be met before a contract can be legally binding. This means that if the contingency is not met, the contract is not enforceable by law. Contingencies are common in real estate contracts, where buyers will often make offers that are contingent on the results of a home inspection or a mortgage approval. For example, if a buyer makes an offer on a house and includes a contingency that the sale is dependent on a satisfactory home inspection, the buyer has the right to back out of the contract if the inspection reveals significant problems with the house. Similarly, if a buyer is unable to obtain financing for the purchase, the contract may be nullified. Overall, contingencies provide a measure of protection for both parties involved in a contract, ensuring that all necessary conditions are met before any legal obligations are established.
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