Contingency

In real estate contracts, a contingency is a provision that makes the binding nature of the agreement dependent upon the occurrence of a specified event. Until the contingency is satisfied, the parties’ obligations under the contract are conditional and may allow one or both parties to cancel without penalty if the event does not occur. Common contingencies include the buyer obtaining financing, satisfactory property inspections, appraisal approval, or the sale of another property. Contingencies protect the parties by allowing them to proceed with a transaction only if essential conditions are met, reducing risk and uncertainty in the transaction.