Washington State Real Estate Practice Exam

What effect does the presence of a contingency clause have on a real estate contract?

1. It makes the contract void

2. It requires parties to renegotiate

3. It makes the contract conditional

4. It shortens the contract duration

The correct answer is: It makes the contract conditional

The presence of a contingency clause in a real estate contract means that the contract is conditional upon the fulfillment of certain specified criteria. Contingencies are designed to protect the interests of the parties by allowing them to ensure that specific conditions are met before the agreement becomes binding. For instance, a common contingency might require that the buyer secure financing or that the property pass an inspection. If these conditions are not met, the parties may either terminate the contract without penalty or renegotiate based on new findings or developments. This conditional nature is crucial because it provides a safeguard for the parties involved, allowing them flexibility and reducing the risk associated with the transaction. Therefore, the inclusion of a contingency clause clarifies that the contract will only be in effect once specific, agreed-upon conditions are satisfied, emphasizing its role in establishing the contract's conditionality.