Humber/Ontario Real Estate Course 3 Exam Practice

What must a salesperson do when drafting a conditional clause related to the sale of the buyer's property?

1. The clause should always include an escape clause.

2. The clause could be written as either a condition subsequent or a condition precedent.

3. Waivers should not be included in conditional clauses.

4. Such clauses are typically used in seller's markets rather than buyer's markets.

5. The buyer must always be given the option to waive the condition unilaterally.

6. The condition cannot be fulfilled without explicit seller consent.

The correct answer is: The clause could be written as either a condition subsequent or a condition precedent.

When drafting a conditional clause related to the sale of the buyer's property, it is important to understand the distinction between condition subsequent and condition precedent. A condition precedent is a clause that must be fulfilled before the contract becomes binding. In contrast, a condition subsequent refers to an event or condition that, if it occurs after the contract is in effect, may invalidate the agreement or add terms according to the specified contingencies. By allowing for either type of condition, the clause provides flexibility in negotiations. This means that the parties involved can establish terms that best reflect their needs and circumstances, whether that requires prior actions to solidify the agreement or contingencies that allow for exit if conditions change later. Such flexibility is particularly useful in real estate transactions where conditions about financing, inspections, or the sale of an existing property can impact the negotiation process. The other options reflect misunderstandings about contract clauses or market conditions rather than the nature of conditional clauses themselves.