Humber/Ontario Real Estate Course 4 Exam Practice

In what scenario does a terminable clause related to severance apply?

1. Conditional clause following true agreement

2. Clause subsequent to transaction

3. True condition documented in seller’s terms

4. As a condition precedent within the offer

5. Post-transaction settlement

6. Not required for small severance

The correct answer is: As a condition precedent within the offer

A terminable clause related to severance typically applies as a condition precedent within the offer. This means that certain conditions must be met before the contract becomes binding or enforceable. A condition precedent sets up a situation where a party's obligation to perform is contingent upon the occurrence of a specified event or circumstance. In real estate transactions, this often relates to zoning, financing, or specific approvals that must be obtained before the sale can proceed. If these conditions are not fulfilled, the agreement may be terminated, thus providing a safeguard for the parties involved. This is critical as it allows buyers to protect themselves if key conditions that might influence their decision to proceed with the transaction are not satisfied. The other options do not pertain directly to the concept of a terminable clause as it relates to severance. For instance, a conditional clause following a true agreement might not address severance specifically, while a clause subsequent to a transaction refers to terms that take effect after the agreement has been executed. Similarly, true conditions documented in seller’s terms or post-transaction settlements do not inherently relate to the preconditions necessary for the initiation of the agreement. Lastly, small severance not requiring a clause does not fit the context of situations where a lawfully documented condition is