Define: Contingent Financing Clause

A contingent financing clause is a provision in a contract that states that the completion of the agreement is contingent upon the party obtaining financing from a third party.

A contingent financing clause is included to protect the party from being obligated to fulfil the contract if they are unable to secure the necessary financing. It provides an escape route if financing falls through.

Yes, a contingent financing clause can be added to any contract where financing is a crucial component, such as real estate transactions, business acquisitions, or large-scale projects.

Yes, contingent financing clauses are generally legally enforceable as long as they are properly drafted and agreed upon by both parties. However, the specific enforceability may vary depending on the jurisdiction and the language used in the clause.

If the party fails to obtain financing within the specified timeframe or under the agreed-upon terms, the contingent financing clause allows them to terminate the contract without any further obligations or penalties.

Intentionally sabotaging a financing application to invoke the contingent financing clause may be considered a breach of good faith and fair dealing. It is important to act in good faith and make genuine efforts to secure financing.

Yes, the contingent financing clause can be used as a negotiating tool to leverage better terms or conditions for obtaining financing. However, it is essential to negotiate in good faith and not use the clause in bad faith.

The legal requirements for invoking the contingent financing clause will depend on the specific language used in the clause and the jurisdiction. It is advisable to consult with a legal professional to ensure compliance with applicable laws.

Yes, if a party is sued for breach of contract due to their failure to fulfil the agreement, they can use the contingent financing clause as a defence to show that their obligation was contingent upon obtaining financing. However, the success of this defence will depend on the specific circumstances and the court’s interpretation of the clause.