Billman v. Hensel

This case is about a real estate contract.

The Hensel couple entered into a contract to sell their house to the Billman couple for $54,000. Their contact required the Billmans to pay $1,000 as earnest money. The Billmans were, moreover, required to pay get financing for $35,000 within 30 days.

The Billmans banker required Mr. Billman to immediately pay $6,500 to the seller Hensel--otherwise the bank wouldn't finance the $35,000.

Billman backed out of the contract even after Mr. Hensel offered him a $5,000 discount.

• The Hensels (plaintiffs) = sellers of a home
• Billmans (defendant) = buyers

The Hensels sued the Billmans in the Indiana State Court seeking payment of the earnest money which the Billmans had stopped.

Hensels win $1,000 in the trial court.

What happens when a contracting party fails to make a good-faith effort to satisfy the conditions of a contract?

Does a real estate contract's subject-to-financing clause impose on the buyer an implied obligation to make a reasonable & good-faith effort to satisfy the condition by obtaining the requisite financing?

Yes. A real estate contract's subject-to-financing clause imposes on the buyer an implied obligation to make a reasonable & good-faith effort to satisfy the condition by obtaining the requisite financing.

The Billmans only contacted 1 bank for financing & gave up after being denied. They made no effort to contact other financial institution to obtain their financing. Additionally, the Billmans didn't compete a formal loan application; they didn't show any seriousness to meet their side of the bargain.