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What Is an Escape Clause?

When establishing a contract with someone, it is advisable to read it carefully to see if there is an escape clause.
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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 19 September 2014
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An escape clause is a clause in a contract which allows a party to break the contract without penalty under certain situations. Escape clauses are designed to prevent people from feeling like they are forced into complying with a contract when circumstances change. They are common in many real estate contracts and other types of agreements, and when establishing a contract with someone, it is advisable to read it carefully to see if there is an escape clause, and when it kicks in.

Real estate contracts are one area in which escape clauses are widely utilized. The contract is usually subject to a due diligence period, in which the buyer can order inspections of the house and withdraw from the contract if the inspections reveal problems which the buyer does not want to deal with. For example, a pest report could indicate that the home needs substantial work to deal with insects, or a contractor could point out that the home needs substantial renovations to be brought up to code.

Likewise, many real estate transactions include a funding escape clause. If the buyer cannot secure funding within a set time period, the seller can cancel the contract, and likewise, the buyer can cancel the contract as well. Sometimes, when people want to push a deal through quickly, they can write these common clauses out, indicating that they are entering a contract for a house as-is and that the sale is not contingent on financing.

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Escape clauses are also available in the form of a cooling off period or 72 hour clause for big purchases like cars and appliances. The buyer can return the purchase within the cooling off period for a refund, assuming that no damages have been incurred. Likewise, items bought from door to door salesmen are subject to similar escape clauses, in part in recognition of the fact that people sometimes feel pressured into buying things they do not want from such salespeople.

Not every contract has an escape clause, and those that do usually have precisely defined terms which do not leave much room for error. People who think that they may need such a clause should make sure that it is written into the contract in terms which meet their needs, and people should also be cautious of abusing escape clauses. Sometimes, it is possible to be held liable under the argument that the contingency being cited under the escape clause is not sufficient for release from the contract.

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keirozj
Post 4

What is a "mac" clause (heard of it the first time recently from a German colleague)? I believe it is some kind of escape clause, but don't know what it stands for.

JaneAir
Post 2

@strawCake - Door to door salespeople are just trying to make a living! I almost don't think it's fair that people can buy something and then decide they don't want it.

I think escape clauses are also totally necessary in real estate though. There are so many things that go on after the initial sales process is started. No one should have to be stuck with a house that has extensive damage they weren't aware of when they first decided to buy.

strawCake
Post 1

I had no idea stuff bought from a door to door salesperson was subject to an escape clause. This is good to know!

I used to live in a high rise with secure entry-no random people could just walk in and go door to door. However, ever since I moved I've been dealing with people coming door to door for various reasons. Usually I just don't answer the door, but my boyfriend sometimes. I'm glad to know that if he gets suckered into actually buying something we can return it!

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