Cengage Advantage Books: Law for Business 18th Edition by John Ashcroft ,Janet Ashcroft

Exercise 3

William and Karen McCoy contracted to buy James and Nancy Brown's house and made a deposit of $127,000. The contract stated the sale was conditioned upon the McCoys getting a commitment for a mortgage "with interest at the prevailing rate." The McCoys agreed to "pursue [a mortgage commitment] diligently." If the McCoys could not obtain the mortgage and "demonstrated due diligence," they could terminate the contract, and their deposit would be returned to them. The McCoys submitted a mortgage application to one bank, which issued a commitment letter conditioned on William, who was unemployed, obtaining full-time, salaried employment. McCoy sought such a position from one employer and did not obtain it. The McCoys then notified the Browns they were unable to obtain a mortgage commitment and requested return of their deposit. The Browns refused, and the McCoys sued them. Did the McCoys breach the contract, and if so, what should the damages be?