Humber/Ontario Real Estate Course 4 Exam Practice

Which of the following clause drafts is incorrect regarding balance of payment?

1. The clause stating the buyer agrees to pay the seller on completion, using a lawyer’s trust account in various forms.

2. Inclusion of the phrase "on completion of this transaction" should be "on closing of this transaction."

3. The clause missing the amount in numbers and the phrase "subject to adjustments."

4. The clause should include both the amount in words and numbers.

5. The clause should explicitly state the type of account used for the payment.

6. The clause should mention the date of completion.

The correct answer is: The clause missing the amount in numbers and the phrase "subject to adjustments."

The correct choice indicates that a clause regarding the balance of payment is flawed due to the omission of the amount in numbers as well as the phrase "subject to adjustments." In real estate transactions, it is essential that payment clauses clearly specify the amount to be paid, and this should be presented both in numerical format and in words to avoid any ambiguity. Including "subject to adjustments" is equally important as it clarifies that the final amount may be adjusted based on various factors, such as property taxes or service charges that can affect the total owed. The absence of these critical components can lead to confusion or disputes between parties regarding the payment terms, thereby undermining the integrity of the contract. The other options touch on different aspects of drafting payment clauses, but they address alternative details rather than the critical necessity of specifying the payment amount and the potential adjustments. Hence, choice C accurately identifies the specific issue that makes it an incorrect draft in the context of balance of payment.