A buyer submits an Agreement of Purchase and Sale for a residential property with a financing condition that specifies a fixed interest rate and amortization period. The seller accepts the offer. Subsequently, the buyer’s lender offers a mortgage with a higher interest rate and a shorter amortization period than originally stipulated in the condition. The buyer, despite qualifying for the mortgage, wishes to terminate the agreement, citing the condition’s non-fulfillment. Which of the following statements accurately reflects the legal implications?

Question: A buyer submits an Agreement of Purchase and Sale for a residential property with a financing condition that specifies a fixed interest rate and amortization period. The seller accepts the offer. Subsequently, the buyer’s lender offers a mortgage with a higher interest rate and a shorter amortization period than originally stipulated in the condition. The buyer, despite qualifying for the mortgage, wishes to terminate the agreement, citing the condition’s non-fulfillment. Which of the following statements accurately reflects the legal implications?

Answer options: ✅ The buyer is likely entitled to terminate the agreement as the specific terms of the financing condition were not met, even if a mortgage was obtainable.

• The buyer cannot terminate the agreement as they qualified for financing, irrespective of the interest rate or amortization details.
• The seller can sue for specific performance, arguing that the buyer acted in bad faith by not accepting a reasonable alternative financing arrangement.
• The financing condition is considered fulfilled if the buyer is approved for any mortgage, regardless of its terms.

Correct answer: The buyer is likely entitled to terminate the agreement as the specific terms of the financing condition were not met, even if a mortgage was obtainable.

Explanation: A financing condition, effectively, is a 'true' condition precedent. For the condition to be fulfilled, the financing obtained by the buyer must match the specific, objective terms stipulated in the agreement. If the interest rate or other key terms differ from those specified, the condition is not met, giving the buyer the right to waive or fulfill, or to terminate the agreement if they act reasonably and in good faith to obtain the specified financing.