California Real Estate Practice Exam

A clause in a real property sales contract for newly subdivided land prohibits the purchaser from prepaying principal during the first 12 months. If the buyer wishes to pay off the contract within this period, the clause:

1. could have been waived by the buyer by sending such notification to the subdivider

2. is binding on the buyer

3. is illegal and voids the contract

4. may be ignored by the buyer

The correct answer is: could have been waived by the buyer by sending such notification to the subdivider

The statement that the clause could have been waived by the buyer by sending notification to the subdivider is correct because it indicates that there may be room for negotiation in contractual agreements. A waiver is a legal way for one party to relinquish their right to enforce a particular provision. If the buyer and subdivider have included such stipulation in the contract, it was likely made to facilitate the subdivider's cash flow needs during the initial period of the loan. In situations like this, if the buyer wants to pay off the principal early, they can communicate their intent to the subdivider. If the subdivider agrees to that change, the clause can be waived, allowing the buyer to proceed with paying off the principal. This highlights an important aspect of contract law, which often allows for flexibility if all parties mutually agree to the modification. Other options focus on whether the clause is binding, illegal, or can be ignored. However, focusing solely on those aspects might overlook the potential for the buyer to negotiate a different arrangement through proper communication, thus recognizing the dynamic nature of real estate contracts.