Escape clause

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Contract Law
Part of the common law series
Contract
Contract formation
Offer and acceptance  · Mailbox rule
Mirror image rule  · Invitation to treat
Firm offer  · Consideration
Defenses against formation
Lack of capacity to contract
Duress  · Undue influence
Illusory promise  · Statute of frauds
Non est factum
Contract interpretation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Excuses for non-performance
Mistake  · Misrepresentation
Frustration of purpose  · Impossibility
Impracticability  · Illegality
Unclean hands  · Unconscionability
Accord and satisfaction
Rights of third parties
Privity of contract
Assignment  · Delegation
Novation  · Third party beneficiary
Breach of contract
Anticipatory repudiation  · Cover
Exclusion clause  · Efficient breach
Fundamental breach
Remedies
Specific performance
Liquidated damages
Penal damages  · Rescission
Quasi-contractual obligations
Promissory estoppel
Quantum meruit
Subsets: Conflict of law Commercial law
Other areas of the common law
Tort law  · Property law
Wills and trusts
Criminal law  · Evidence

An escape clause is any clause, term or condition in a contract that allows a party to that contract to avoid having to perform the contract.

If an agreement was drawn up for the sale of a house, for example, the purchaser could include some kind of escape clause in the contract, which will allow him to "escape" from the contract without being liable for breach of contract.

Contents 1 Real estate escape clauses 2 Escape clause abuse 3 Escape clause validity 4 References

[edit] Real estate escape clauses

A "Subject to a builder's inspection to purchaser's full satisfaction" clause is one example of an escape clause. This clause effectively allows the purchaser to "escape" from the contract if an inspection reveals any irregularities or defects.

Another example is the "Subject to 30-day due diligence" clause, which effectively gives the purchaser a 30-day buffer period to inspect any and all aspects of the property before having to commit to the purchase.

A 72-hour clause is an example of a seller's escape clause that frequently appears in real estate contracts.

[edit] Escape clause abuse

Escape clauses, although fulfilling a real and sincere purpose in contracts of all kinds, have the potential of being abused.

For example, the "Subject to a builder's inspection to purchaser's full satisfaction" clause mentioned above can be abused if the buyer contracts a builder and instructs him to find some kind of fault in the property at any cost.

The buyer, in other words, takes advantage of the escape clause to cancel the agreement because he has buyer remorse, rather than because there is something wrong with the property.

[edit] Escape clause validity

Escape clauses that require a purchaser or an expert representing the purchaser to be satisfied with the goods or services being purchased have been attacked in lawsuits as invalid for lack of consideration. The argument is that a party can always escape such a contract by merely claiming to be unsatisfied. Therefore, there is no real requirement for that party to perform their obligations under the contract (to pay for the goods or services), and an agreement that only requires performance by one party is an illusory promise, void as a contract. Instead, such an agreement constitutes a gift from the performing party to the non-performing party.

Courts have generally held, however, that an escape clause containing a requirement of satisfaction nevertheless creates an enforceable contract, because a court could determine whether a claimed lack of satisfaction was entirely unreasonable, and therefore likely feigned to avoid the contract.

[edit] References

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