Waiver of Contingency – Form 182
Buyers and sellers, independently or on advice of their broker, frequently include contingency provisions in a purchase agreement. Contingencies typically call for one or both party’s further approval of a stated condition or the occurrence of an event before the transaction can be closed.
Contingency provisions in a purchase agreement grant either or both the buyer and the seller the conditional right to terminate their obligation to further perform the agreement and close escrow, called a cancellation, unless the contingency is eliminated.
The right to cancel a transaction granted by a contingency provision in the purchase agreement may be eliminated by either:
- satisfaction of the contingency provision by the occurrence of a specified event or the approval of information and conditions contained in data, documents or a report; or
- waiver or expiration of the contingency provision.
On the occurrence or approval called for in a contingency provision, the condition (read: the contingency) is said to be satisfied. Examples include the buyer’s receipt of a loan commitment or their approval of property disclosures. [See first tuesday Form 304]
If a condition is not satisfied, the party authorized or benefitting from the contingency may:
- cancel the transaction by serving the other party with a Notice of Cancellation;
- waive the contingency and proceed with the transaction by notifying the other party the contingency has been waived; or
- allow the time period for cancellation to expire and perform as needed to close the transaction. [See first tuesday Form 182]
The party with the right to cancel may only exercise their right if they have a reasonable basis for the cancellation, called good cause. If a reasonable basis exists, they may cancel and avoid the other party’s enforcement of the purchase agreement.
Often a contingency is included for the benefit of both the buyer and seller. Here, the contingency provision authorizes either the buyer or seller to cancel. However, when either can cancel, the contingency can only be waived by the consent of both parties, called mutual consent. [Spangler v. Castello (1956) 147 CA2d 49]
Occasionally, the buyer is required by the wording of a contingency provision to notify the seller of the buyer’s intention not to cancel if the buyer intends to fully perform and close the transaction. Under this wording, the buyer’s agent uses the same notice of waiver form used for an unequivocal approval. [See Form 182]