All real estate contracts have a "financing contingency" and a "condition contingency" clause in them by default.
The Financing Contingency Clause protects them in the event they can't get the financing they were promised in their prequalification letter and/or if the home does not appraise at the value they offered. (and thus they cant get as much financing). This clause is referred to as a "KICKOUT" clause because they buyer can use it to "kick out" of the contract if needed.
The Condition Contingency clause gives the buyer a few weeks to investigate the property in detail. If the buyer finds anything not to their liking, or they just get cold feet, they can back out during this period BECAUSE this clause is a "KICKOUT" clause. It allows them to kick out of the contract for condition reasons.
The first purpose for the Condition Contingency is to CONFIRM the disclosure statements and defects identified by the Seller prior to Contract Acceptance.
The second purpose is to EXPOSE non disclosed defects , and ask for pricing corrections to avoid negligent or fraudulent misrepresentation claims against the seller that are realized with financial damages at time of Deed Conveyance if not resolved prior.
The third purpose is to just get a chance to review the conditions better and make sure you didn't miss anything that causes you angst, but the condition don't reflect malpresentation by the seller. You just didn't look seriously or hard enough at details before ratifying an offer.
Clause 14F is a "generic" condition removal Clause. 14F(iii) suggest that the buyer "assumed all liabilty, responsibility and expense for Repairs or corrections pertaining to that contengency".
In our case, the Seller failed to disclose $10k in the attic. Numerous things had been done to "get a buyer to believe" the attic was either 1) without damages and/or 2) inaccessible. We looked past those and opened a small access panel that required a drill. We instantly knew there were problems due to smell alone and then the agent started singing like a Canary. It was odd? Why would he admit to disclosure fraud for he and his client? BECAUSE OF THIS CLAUSE...
In our case, the Seller failed to disclose the $5-10k in defects with the Furnace and Hot Water Heater installation. They were both in the garage, with pilot lights below 18" and that represented a fire/explosion hazard. The Seller had been notified of that in 2015. and we know he was also notified of that in 2020 by his General Contractor (directly or through the Sellers' Agent). We discoverd it during our inspections. Why might he try to get away with not disclosing that? BECAUSE OF THIS CLAUSE...
If he doesn'd disclose it and it gets found during escrow and he's confronted he'll feel he won't need to do anything because of this clause. If it gets past the Buyer who does inspections a claim after that fact might be hard to enforce given he had time to find it during escrow, had he hired a competent inspector.
But does this clause provide the protection suggested? NO. Not at all. But if a Seller is lead to believe it does, the time and cost to fight them can cost far more than it's worth and there may even be financial risks involved in CA in the event of a procedural loss in court!
From Loughgrin vs Superior Court
THE MISSING STATEMENT THAT MAKES THIS OKAY
"REMOVAL OF CONDITION CONTINGENCY FREES SELLER OF LIABILTY FOR ALL FULLY AND PROPERLY DISCLOSED DEFECTS. THE SELLER HAS MADE ATTEMPTS TO CLARIFY DEFECTS THAT S/HE FELT WERE NOT DISCLOSED PROPERLY. THE DEFECTS LISTED BELOW ARE IN CONTENTION. THE BUYER RESERVES RIGHT TO PURSUE NEGLIGENT OR FRAUDULENT MISREPRESENTATION IF THEY EXIST AT TIME OF DEED CONVEYANCE."