Minnesota Commercial Purchase Agreement Contingencies

What is a contingency in a Minnesota commercial purchase agreement?

A contingency is a condition written into the purchase agreement that must be satisfied or waived before a party is obligated to close. Minnesota treats it as a condition precedent, a contract term that “calls for the performance of some act or the happening of some event after the contract is entered into, and upon the performance or happening of which [the promisor’s] obligation is made to depend,” and “if the event required by the condition does not occur, there [is] no breach of contract.” (Capistrant v. Lifetouch National School Studios, Inc., 916 N.W.2d 23, 27 (Minn. 2018).) Minnesota applied that rule to a purchase-agreement contingency in Lake Co. v. Molan, where the offer was “contingent upon Purchaser’s success in obtaining within ninety (90) days . . . all necessary permits” and the permits never came: reasoning in the alternative, “[a]ssuming . . . that a purchase agreement had been made,” the court said the seller “could not sue on the contract since the conditions precedent to Clark’s liability were never performed in the manner provided by its terms.” (Lake Co. v. Molan, 269 Minn. 490, 493, 498, 131 N.W.2d 734 (1964).) The label does not do the work: a condition precedent “will not be found absent unequivocal language.” (Mrozik Constr., Inc. v. Lovering Assocs., Inc., 461 N.W.2d 49, 52 (Minn. Ct. App. 1990).) Neither does the absence of the label, because “[t]he term ‘condition precedent’ need not be used in a contract to create a condition precedent” (Hegenes Properties, LLC v. Rodriguez, No. A25-1728 (Minn. Ct. App. May 26, 2026)), and the same opinion cites a decision “holding that contract’s use of ‘provided that’ created condition precedent” (Minnesota Lawyers Mutual Insurance Co. v. Bradshaw & Bryant Law Office PLLC, 19 N.W.3d 206, 220 (Minn. App. 2025), rev. denied (Minn. June 17, 2025)). A commercial purchase agreement can therefore carry a contingency it never names as one.

That framing drives almost every outcome in a stalled deal. You are not “breaking” the contract by exercising a financing or inspection contingency. You are invoking a term both sides agreed to. The seller’s leverage comes from the precise wording: which contingencies exist, what each one covers, how long each window runs, and what a party must do to terminate. Minnesota enforces those mechanics as written, because “conditions . . . must be literally met or exactly fulfilled, or no liability can arise on the promise qualified by the condition,” and “no legal principle permits violation of a contract condition to be completely ignored.” (Capistrant, 916 N.W.2d at 27-28; National City Bank of Minneapolis v. St. Paul Fire & Marine Insurance Co., 447 N.W.2d 171, 176 (Minn. 1989).) Two limits run the other way. A court may excuse the non-occurrence of a condition under Restatement (Second) of Contracts § 229 “unless it was a material part of the agreed exchange” where enforcing it would cause disproportionate forfeiture, a rule Capistrant applied to the forfeiture of deferred compensation under an employment agreement, in what the court called a “unique context,” while expressly declining to decide “whether to adopt section 229 for all purposes.” No Minnesota appellate decision has applied section 229 to excuse a missed purchase-agreement contingency deadline. And you cannot rely on a condition you defeated yourself: “every contract includes an implied covenant of good faith and fair dealing requiring that one party not ‘unjustifiably hinder’ the other party’s performance,” and “the party to a contract cannot take advantage of the failure of a condition precedent when the party itself has frustrated performance of that condition,” though the covenant “does not extend to actions beyond the scope of the underlying contract.” (In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502-03 (Minn. 1995).)

Every contingency, and every later change to one, belongs in writing. Minnesota’s statute of frauds provides that a contract for the sale of any lands “shall be void unless the contract, or some note or memorandum thereof, expressing the consideration, is in writing and subscribed by the party by whom the lease or sale is to be made, or by the party’s lawful agent thereunto authorized in writing.” (Minn. Stat. § 513.05.) Read the requirement carefully, because two details get lost: the writing must express the consideration, and the signature the statute demands is the seller’s, not both sides’. The seller’s own subscription is not the end of it, though. The Supreme Court overruled earlier authority “to the extent that it implies that a vendor’s signature alone on an otherwise complete memorandum is sufficient to satisfy the statute of frauds,” and granted specific performance “[b]ecause there exists a sufficient memorandum of sale that was subscribed by the vendor, the delivery of which was accepted by the vendee’s agent.” (Schwinn v. Griffith, 303 N.W.2d 258, 263 (Minn. 1981).) What the buyer must supply, then, is acceptance of delivery rather than a signature: the Schwinn buyer signed nothing, and the auctioneer supplied acceptance because once the property is struck off he “becomes also the agent of the purchaser, at least to the extent of binding him by his memorandum of sale” (quoting Wright v. May, 127 Minn. 150, 152, 149 N.W. 9, 10 (1914)). Getting the buyer’s own signature remains the practical course. The same section adds that an agent-signed contract is not “entitled to record unless the authority of such agent be also recorded,” which matters when a manager, broker, or attorney-in-fact signs. The statute says nothing about amendments; that rule comes from case law construing it, holding that section 513.05 “requires that any modification of a real estate sale contract, or a lease of more than one year’s duration, be in writing,” while adding that “the rule holds true only if . . . the modified contract had remained executory.” (Alexander v. Holmberg, 410 N.W.2d 900, 901 (Minn. Ct. App. 1987).) The writing rule is not absolute: Minn. Stat. § 513.06 preserves the power of equity “to compel the specific performance of agreements in cases of part performance thereof,” and an emailed, electronically signed amendment can satisfy section 513.05 because “[i]f a law requires a record to be in writing, an electronic record satisfies the law” and “[i]f a law requires a signature, an electronic signature satisfies the law” (Minn. Stat. § 325L.07), subject to the limit that the chapter “applies only to transactions between parties, each of which has agreed to conduct transactions by electronic means,” judged “from the context and surrounding circumstances, including the parties’ conduct” (Minn. Stat. § 325L.05(b)). The party relying on a purely oral land agreement carries a clear-and-convincing burden of proof. (Christie v. Estate of Christie, 911 N.W.2d 833 (Minn. 2018).) Waiver follows different rules: a party “may waive a condition precedent to his own performance of a contractual duty, when such condition precedent exists for his sole benefit and protection,” and the Supreme Court sustained a waiver drawn from the parties’ dealings rather than a signed writing (Miracle Construction Co. v. Miller, 251 Minn. 320, 326-27, 87 N.W.2d 665 (1958)); where the contingency benefits both sides, both must waive it before an enforceable contract comes into existence (Hanson v. Moeller, 376 N.W.2d 220, 224-25 (Minn. Ct. App. 1985)). Every contingency belongs in a Minnesota real estate purchase agreement with its own written deadline.

Can I walk away during due diligence and get my earnest money back?

A contingency is a condition precedent, “one which is to be performed before the agreement of the parties becomes operative.” (Hanson v. Moeller, 376 N.W.2d 220, 223, 225 (Minn. Ct. App. 1985).) Whether a failed contingency also means no enforceable contract ever came into existence depends on how the parties drafted the clause. In Hanson the parties themselves agreed that the financing contingency “constitutes a condition precedent which must be performed before the contract becomes enforceable” and that it “benefitted both the buyers and sellers,” so its failure meant no enforceable contract ever came into existence there. (Hanson, 376 N.W.2d at 223-25.) The general definition assumes a contract already made: a condition precedent is “any fact or event, subsequent to the making of a contract, which must exist or occur before a duty of immediate performance arises under the contract.” (National City Bank of Minneapolis v. St. Paul Fire & Marine Insurance Co., 447 N.W.2d 171, 176 (Minn. 1989).) Most commercial due diligence, title, and environmental clauses are drafted as termination rights inside a binding agreement, and where the agreement is binding in all its essential terms the seller must terminate under the statute with an opportunity to cure. (TNT Properties, Ltd. v. Tri-Star Developers LLC, 677 N.W.2d 94, 103 (Minn. Ct. App. 2004).) Getting the money back is a separate step, and this is where deals stall. Where a licensed broker or closing agent holds the deposit in trust, trust funds “may only be disbursed upon the occurrence of one of the following: (1) a closing of the transaction; (2) written agreement between the parties; (3) pursuant to an affidavit as required in section 559.217; or (4) a court order.” (Minn. Stat. § 82.75, subd. 5(d).) The same paragraph runs a deadline the other way: “[d]isbursement must be made within ten business days following the consummation or termination of a transaction if the applicable agreements are silent as to the time of disbursement.” Your termination notice is not one of the four disbursement grounds, so if the seller will not sign the standard cancellation form and the parties disagree about who takes the money, it stays in the trust account until a statutory cancellation, a written agreement, or a court order supplies the ground for release.

On residential property the statutory route both ends the agreement and moves the money: after a completed cancellation the purchase agreement “is void and of no further force or effect,” and the earnest money “must be distributed to, and become the sole property of, the party completing the cancellation of the purchase agreement” (Minn. Stat. § 559.217, subd. 7(a)), with the affidavit of cancellation serving as “a sufficient basis for that person to release the earnest money” when delivered to the escrow holder (subd. 7(d)). Racing to cancel does not win the deposit: if both sides serve notices, “the purchase agreement is deemed canceled as of the date the second cancellation notice is served,” and “[a] court shall make a determination of which party is entitled to the earnest money without regard to which party first initiated the cancellation proceeding” (subd. 2). That machinery is also permissive rather than mandatory, because a purchase agreement that cancels by its own terms is already canceled: “the statute permits parties to obtain a declaratory cancellation, but it does not require them to do so.” (Kalenburg v. Klein, 847 N.W.2d 34, 40-41 (Minn. Ct. App. 2014).) On a commercial or larger multifamily deal none of section 559.217 applies at all, so the purchase agreement’s own cancellation and release terms plus the escrow instructions govern as between the parties. The escrow itself is a separate constraint: section 82.75, subdivision 5(d) applies to any broker or closing agent holding trust funds without limitation to residential transactions, so on a commercial deal with the affidavit route closed, release turns on a closing, a written agreement between the parties, or a court order, with the ten-business-day disbursement deadline running once the transaction consummates or terminates. That is the practical reason to negotiate a signed release mechanism into the escrow instructions before the dispute exists.

Timing is unforgiving. A termination delivered one day after the window closes is a different legal event from one delivered one day before. Outside the window, or for a reason the clause does not reach, the deposit is at risk and the seller may claim it, though not by letter alone: on a buyer’s default the seller of an agreement subject to Minn. Stat. § 559.21 terminates by serving the statutory notice, which for a purchase agreement runs 30 days “unless by their terms they provide for a longer termination period” and “must be given notwithstanding any provisions in the contract to the contrary” (subd. 4(a)). Serving the notice starts a clock rather than ending the deal: “[t]he contract is reinstated if, within the time mentioned, the person served: (1) complies with the conditions in default; . . . (5) pays attorneys’ fees,” and “[t]he contract is terminated if the provisions of paragraph (c) are not met” (subd. 4(c)-(d)). Curing a purchase-agreement default is also cheaper than curing a contract for deed, because the two-percent payment applies “except for earnest money contracts, purchase agreements, and exercised options” (subd. 2a(4)). Two mechanics matter to a seller counting on 30 days: the notice “must be served within the state in the same manner as a summons in the district court,” so the formalities that govern service of a summons govern the notice and an informal letter or email does not start the clock, and if the buyer has left the state service may be by publication with the period stretching to 90 days (subd. 4(a)-(b)). A buyer who maintains the termination was wrongful can stop the clock instead of losing the deposit, because the statutory notice text itself says the contract survives if “YOU SECURE FROM A COUNTY OR DISTRICT COURT AN ORDER THAT THE TERMINATION OF THE CONTRACT BE SUSPENDED UNTIL YOUR CLAIMS OR DEFENSES ARE FINALLY DISPOSED OF BY TRIAL, HEARING OR SETTLEMENT” (subd. 3). For a closer look at what happens to the earnest money when a deal collapses, the remedy section of the agreement matters as much as the contingency itself.

How does a financing contingency protect a commercial buyer?

A financing contingency lets you terminate and recover the earnest money if you cannot obtain a loan on the terms the clause describes. It exists because a commercial buyer rarely closes with cash, and a lender’s decision is outside your full control.

There is a duty attached, and Minnesota states it as a holding: a buyer has “an affirmative duty to satisfy the financing contingency in good faith” (Hoffman v. Nygaard, 393 N.W.2d 695, 696 (Minn. Ct. App. 1986)), because “[t]he buyers cannot have the exclusive right to determine whether financing can be or has been obtained without making illusory the promise to purchase” (Plaisted v. Fuhr, 367 N.W.2d 541, 545 (Minn. Ct. App. 1985)). The duty is bounded, which is the half most buyers never hear. The Plaisted court could “find no duty either to make multiple applications or to waive a financing deadline imposed for the benefit of both parties,” held that “[s]ince their written application was still pending on May 1, they were not required to make a second application,” and called findings resting on implied duties “to make further loan applications, to seek an extension of the financing deadline, and to refrain from exploring alternative housing” clearly erroneous. (Plaisted, 367 N.W.2d at 545.) Nor must you take whatever a lender will write: “the financing available must comply with the terms of the purchase agreement before the contracting parties can demand performance.” (Hoffman, 393 N.W.2d at 696.)

On today’s forms the obligation is usually express rather than implied, and the standard is best efforts, defined as “[d]iligent attempts to carry out an obligation” and “measured by the measures that a reasonable person in the same circumstances and of the same nature as the acting party would take.” (Kalenburg v. Klein, 847 N.W.2d 34, 38 (Minn. Ct. App. 2014).) Two applications, two appraisals, and two denials satisfied that standard. Whether you actually failed to obtain financing is judged objectively: “[t]o ‘obtain suitable financing’ means that a buyer is financially ready and able to perform,” reaching the ability “to complete the contract of purchase according to its terms,” and “where the purchaser relies primarily . . . upon the proceeds of a contemplated loan . . . he is financially able to buy only if he had a definite and binding commitment from such third-party loaner.” (Jones v. Amoco Oil Co., 483 N.W.2d 718, 722 (Minn. Ct. App. 1992).) Preapproval talk, a banker’s favorable view, or an expired commitment letter is not enough.

Watch which direction the clause points. In that same commercial gas-station sale the addendum said that if the buyer could not obtain the described financing the contract “shall be null and void and of no further force or effect and all earnest money herein paid shall be returned to Purchaser,” and the seller used it: it declared the agreement terminated and forced the earnest money back on a buyer who insisted he was ready to close, with the Court of Appeals holding the contract “was nullified by its own terms; Amoco was not required to follow the procedures of section 559.21.” (Jones, 483 N.W.2d at 720, 724.) An automatic “null and void” clause voids the deal for both sides; if you want an election you can exercise or waive, the clause has to say so. Once the agreement cancels on its own terms there is nothing left to rescue, and a seller’s late price reduction “was actually a new offer, which the Kleins were not required to accept.” (Kalenburg, 847 N.W.2d at 41.) Drafting the clause subjectively does not make it unenforceable: financing “satisfactory to buyers” does not make the agreement illusory, and a reference to a “conventional mortgage” is “language which strongly indicates that the interest rate will be the market rate,” though naming the rate, term, and amount removes the fight entirely. (Dolder v. Griffin, 323 N.W.2d 773, 778-79 (Minn. 1982).) This is one place where the difference between a letter of intent and a binding purchase agreement becomes concrete, because once the purchase agreement is signed, the good-faith duty is live.

What does a due diligence or feasibility contingency actually let me investigate?

A feasibility contingency gives you a defined window to investigate the property and terminate if the results are unsatisfactory. In a commercial deal that investigation is broad: the physical condition of the building, the zoning and permitted uses, the environmental status, the state of title, the existing leases and tenant estoppels, and the financial performance of the property. Minnesota supplies none of that by default. The scope of what you may investigate, the length of the window, and the notice required to terminate are whatever the purchase agreement states, because “[t]he plain and ordinary meaning of the contract language controls, unless the language is ambiguous.” (Kalenburg v. Klein, 847 N.W.2d 34, 40 (Minn. Ct. App. 2014).)

How broad your walk-away right is depends on the drafting, not on the label. A clause letting you terminate if the property is unsatisfactory in your sole discretion gives the widest exit. Minnesota has upheld a buyer-satisfaction condition in a financing clause rather than striking it as illusory, and a satisfaction-based contingency is enforced on the rule that the expression of dissatisfaction “must be genuine and not arbitrary, and that an objective criterion, — good faith — controls the exercise of the right to determine satisfaction.” (Dolder v. Griffin, 323 N.W.2d 773, 778-79 (Minn. 1982).) That formulation is borrowed language rather than the Minnesota court’s own: “The California court in Rodriguez v. Barnett stated” the quoted standard, and Dolder applied it to a financing clause, so reading good faith as the boundary on a sole-discretion feasibility out is an inference from the financing cases rather than a holding on that clause. A clause tied to a narrower standard, such as the property being unsuitable for a specifically named use, requires you to fit your reason inside that standard, and Minnesota reads conditions literally, so a termination that misses the window or misses the stated standard does not get the benefit of the condition. Zoning is a frequent sticking point: a buyer who needs a particular use should confirm it before the window closes, and our overview of zoning and land use compliance explains why a permitted-use assumption calls for real diligence. The most common pattern I see in failed commercial deals is a buyer who relied on a feasibility contingency that was narrower than the buyer believed.

How do title and survey contingencies work in Minnesota?

A title contingency gives you a window to obtain a title commitment and a survey, object to defects, and terminate or require cure if the seller will not clear them. The procedure is contractual: the clause sets how long you have to object, how you must deliver the objection, and what happens if the seller cannot or will not fix the defect. If you want a cure obligation enforceable against the seller, the clause has to impose one; otherwise your remedies are the ones the clause names, typically canceling or waiving the objection and closing.

The drafting also decides what statutory help exists on a residential deal, and the difference is a cure period. Cancellation with a right to cure is available only where an unfulfilled condition exists “which does not by its terms cancel the purchase agreement,” so “[c]ancellation under subdivision 3 is not available here because the purchase agreement was canceled by its own terms,” and “declaratory cancellation under subdivision 4 does not include a cure provision.” (Kalenburg v. Klein, 847 N.W.2d 34, 40-41 (Minn. Ct. App. 2014).) A statutory cancellation notice is also ineffective unless an unfulfilled condition actually exists under the clause. (Dimke v. Farr, 802 N.W.2d 860, 863 (Minn. Ct. App. 2011).) None of that section 559.217 machinery reaches a commercial purchase, where the contract’s own objection and cure terms govern the title process, subject to section 559.21 if the seller later terminates for default.

A commercial buyer relies on this clause because a title search of recorded documents does not catch everything. A current survey can reveal an encroachment, a boundary discrepancy, or a use of the property that no recorded instrument discloses. The risk from an unrecorded easement is real but narrower than it sounds, and it runs on notice rather than on recording alone. Minnesota’s recording act makes every unrecorded conveyance “void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any part thereof, whose conveyance is first duly recorded” (Minn. Stat. § 507.34), and as used in that chapter “conveyance” includes “every instrument in writing whereby any interest in real estate is created, aliened, mortgaged, or assigned,” “except wills, leases for a term not exceeding three years, and powers of attorney” (Minn. Stat. § 507.01). That exception matters on leased commercial property: a lease for a term not exceeding three years is excepted from the chapter’s definition of “conveyance” (Minn. Stat. § 507.01), so the voiding rule section 507.34 applies to unrecorded conveyances does not reach it, which is why tenant estoppels and a physical inspection do work the title commitment cannot. You are not a good faith purchaser if you had actual, implied, or constructive notice (Miller v. Hennen, 438 N.W.2d 366, 369-70 (Minn. 1989)), and a burden “open and visible and apparent on ordinary inspection of the premises” charges you with it (Levine v. Twin City Red Barn No. 2, Inc., 296 Minn. 260, 264, 207 N.W.2d 739 (1973)). An unrecorded easement that neither the record nor a reasonable inquiry would reveal is unenforceable against you (Levine v. Bradley Real Estate Trust, 457 N.W.2d 237, 240-41 (Minn. Ct. App. 1990)). That is exactly why the walk-through and the survey, not the title commitment, are what find these rights, and why waiving the survey to speed up a deal accepts whatever the survey would have shown. On registered (Torrens) land the rule tightens: a good faith purchaser holds the land “free from all encumbrances and adverse claims” other than what appears on the last certificate of title plus seven enumerated exceptions (Minn. Stat. § 508.25), and only actual knowledge of an unregistered interest defeats good faith (In re Collier, 726 N.W.2d 799, 809 (Minn. 2007)). Two smaller points from the same recording statute: a first-recorded quitclaim deed in the chain neither costs a buyer good faith status nor is “of itself notice to the subsequent purchaser of any unrecorded conveyance,” and the section also subordinates unrecorded interests to attachments and judgments docketed against the record owner. Our discussion of unrecorded easements a title search can miss covers why a survey contingency belongs alongside the title contingency, and for the timing rules that govern the objection process, see our explanation of title objection deadlines.

Why does a commercial buyer need an environmental contingency?

A commercial buyer needs an environmental contingency because owning contaminated property carries severe liability. Under the Minnesota Environmental Response and Liability Act, and “[e]xcept as otherwise provided in subdivisions 2 to 12,” a person responsible for a release of a hazardous substance “is strictly liable, jointly and severally,” for governmental response costs, “all reasonable and necessary removal costs incurred by any person,” and natural resource damages. (Minn. Stat. § 115B.04, subd. 1.) Note the second clause: your exposure is not limited to the state, because a neighbor or a later purchaser can pursue you directly.

Read the qualifiers with the rule. There is no liability under that section “for response costs or damages which result from the release of a pollutant or contaminant” as opposed to a hazardous substance (subd. 2). The intervening-act defenses (act of God, act of war, vandalism or sabotage, or the act or omission of a third party or the plaintiff) are narrow: “third party” excludes anyone in the chain of responsibility for the substance, and the vandalism and third-party defenses apply only if the defendant proves it “exercised due care with respect to the hazardous substance concerned” and “took precautions against foreseeable acts or omissions” (subd. 7). The party asserting a defense carries it: “[a]ny person claiming a defense provided in subdivisions 6 to 11 has the burden to prove all elements of the defense by a preponderance of the evidence” (subd. 12). Joint and several is also not the end of the analysis, because “[a]ny person held jointly and severally liable under section 115B.04 has the right at trial to have the trier of fact apportion liability among the parties,” with contribution and reallocation of uncollectible shares handled under Minn. Stat. § 604.02. (Minn. Stat. § 115B.08.)

Ownership alone does not make you a responsible person. “An owner of real property is not a person responsible for the release or threatened release of a hazardous substance from a facility in or on the property unless that person” falls within one of five listed categories. (Minn. Stat. § 115B.03, subd. 3.) The category that most often reaches a commercial buyer is conjunctive, not a bare knowledge test: it requires both that the owner “knew or reasonably should have known that a hazardous substance was located in or on the facility at the time right, title, or interest in the property was first acquired by the person” and that the owner “engaged in conduct associating that person with the release” (clause (4)). A separate clause reaches an owner who “took action which significantly contributed to the release” after learning of the substance (clause (5)), which is why a buyer who finds a condition during diligence needs a plan for handling it, not just a decision whether to close. Two drafting consequences follow directly from the same subdivision: a written warranty or representation “set forth in an instrument conveying any right, title or interest in the real property . . . is admissible as evidence of whether the person acquiring any right, title, or interest in the real property knew or reasonably should have known that a hazardous substance was located in or on the facility” (subd. 3(b)), so environmental representations belong in the deed and not only in the purchase agreement; and liability accruing to an owner “does not accrue to any other person who is not an owner of the real property merely because the other person holds some right, title, or interest in the real property” (subd. 3(c)), with separate protection for a foreclosing mortgagee (subd. 6) and a contract for deed vendor (subd. 7).

Federal law runs in parallel and reaches the current owner: liability attaches “[n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b)” to “the owner and operator of a vessel or a facility.” (42 U.S.C. § 9607(a)(1).) One route out is the innocent-landowner defense, which operates through the third-party defense in section 9607(b)(3) and opens only if “[a]t the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the facility” (42 U.S.C. § 9601(35)(A)(i)), so a buyer who learns of the contamination before acquiring the property no longer has this defense. Here is where the common advice about a clean Phase I overstates the protection. Establishing that you had no reason to know takes more than the report: you must show both that you “carried out all appropriate inquiries” on or before the acquisition date and that you “took reasonable steps to—(aa) stop any continuing release; (bb) prevent any threatened future release; and (cc) prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance.” (42 U.S.C. § 9601(35)(B)(i).) The defense then continues after closing, conditioned on “full cooperation, assistance, and facility access” to those conducting response actions, compliance “with any land use restrictions established or relied on in connection with the response action,” and not impeding “the effectiveness or integrity of any institutional control” (§ 9601(35)(A)). Three of the statute’s ten inquiry criteria turn on facts you hold rather than facts the consultant gathers: “[s]pecialized knowledge or experience on the part of the defendant,” “[t]he relationship of the purchase price to the value of the property, if the property was not contaminated,” and “[c]ommonly known or reasonably ascertainable information about the property” (§ 9601(35)(B)(iii)), so the inquiry cannot be fully delegated to the report.

The standard the consultant follows and the age of the work both matter. EPA’s rule now recognizes “[t]he procedures of ASTM International Standard E1527-21,” and the prior E1527-13 standard could be used only “[u]ntil February 13, 2024.” (40 C.F.R. § 312.11.) That recognition is a safe harbor rather than a mandate, because the rule says the listed industry standards “may be used to comply with the requirements set forth in §§ 312.23 through 312.31,” so an inquiry built to E1527-21 is the recognized way to satisfy the substantive requirements, not the only way. The timing limits bind regardless of which route the consultant follows: the inquiry “must be conducted within one year prior to the date of acquisition,” and five components (interviews with past and present owners, operators, and occupants; cleanup lien searches; government records reviews; visual inspections of the property and adjoining properties; and the environmental professional’s declaration) “must be conducted or updated within 180 days of and prior to the date of acquisition.” (40 C.F.R. § 312.20.) A long option period or a financing delay can push an otherwise clean Phase I out of compliance on timing alone.

A finding is not automatically a reason to walk, because a second federal route survives knowledge: bona fide prospective purchaser status. That shield runs to a status rather than to ignorance, and the status requires every one of the eight criteria the statute lists: “[a]ll disposal of hazardous substances at the facility occurred before the person acquired the facility,” all appropriate inquiries, “all legally required notices with respect to the discovery or release of any hazardous substances at the facility,” appropriate care by “taking reasonable steps to—(I) stop any continuing release; (II) prevent any threatened future release,” cooperation, assistance, and access, compliance with any institutional control, compliance with information requests and subpoenas ("[t]he person complies with any request for information or administrative subpoena issued by the President under this chapter"), and no affiliation with a potentially liable person “through—(aa) any direct or indirect familial relationship; or (bb) any contractual, corporate, or financial relationship.” (42 U.S.C. § 9601(40)(B).) A buyer who meets them can close on known contamination without owner liability, because “a bona fide prospective purchaser whose potential liability . . . is based solely on the bona fide prospective purchaser being considered to be an owner or operator of a facility shall not be liable as long as the bona fide prospective purchaser does not impede the performance of a response action or natural resource restoration” (42 U.S.C. § 9607(r)(1)). That shield protects the buyer personally rather than the property: where there are “unrecovered response costs incurred by the United States at a facility for which an owner of the facility is not liable by reason of paragraph (1)” and “[t]he response action increases the fair market value of the facility above the fair market value of the facility that existed before the response action was initiated,” then “the United States shall have a lien on the facility” for those costs (42 U.S.C. § 9607(r)(2)-(3)). The lien is capped rather than open-ended: it “shall be in an amount not to exceed the increase in fair market value of the property attributable to the response action at the time of a sale or other disposition of the property” (42 U.S.C. § 9607(r)(4)). Contracting the problem away goes only so far: “[n]o indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility . . . to any other person the liability imposed under this section,” while the same paragraph adds that “[n]othing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section” (§ 9607(e)(1)), so an indemnity is enforceable between the parties even though it cannot move liability off the owner as against the government or a third party. The seller’s side deserves a mention too, because a Phase I finding delivered during diligence becomes a permanent disclosure obligation: an owner who “obtained actual knowledge of the release . . . and then subsequently transferred ownership of the property to another person without disclosing such knowledge . . . shall be treated as liable under section 9607(a)(1) . . . and no defense under section 9607(b)(3) . . . shall be available.” (42 U.S.C. § 9601(35)(C).) On the Minnesota side, affirmative assurance comes from a Pollution Control Agency determination that specified actions will not constitute conduct associating you with the release (Minn. Stat. § 115B.178), not from the consultant’s report. Environmental risk can also be allocated by contract, as our discussion of environmental indemnity clauses explains.

What does an “AS-IS” clause really mean for a Minnesota buyer?

Sellers routinely put an “AS-IS” clause into the purchase agreement. What it does not do, on residential property, is shift the risk of defects the seller already knows about. Before signing an agreement to sell or transfer residential real property the seller must give a written disclosure of “all material facts of which the seller is aware that could adversely and significantly affect: (1) an ordinary buyer’s use and enjoyment of the property; or (2) any intended use of the property of which the seller is aware.” (Minn. Stat. § 513.55, subd. 1.) That duty is displaced only by a written waiver, which “does not waive, limit, or abridge any obligation for seller disclosure created by any other law” (Minn. Stat. § 513.60), and no clause or waiver reaches fraud, because “[n]othing in sections 513.52 to 513.60 precludes liability for an action based on fraud, negligent misrepresentation, or other actions allowed by law” (Minn. Stat. § 513.57, subd. 3). A seller who “was aware of material facts pertaining to the real property” and failed to disclose them “is liable to the prospective buyer,” with the action due “within two years after the date on which the prospective buyer closed the purchase or transfer of the real property” (subd. 2).

The protection for what the seller did not know comes from the statute itself, not from the “AS-IS” clause. Section 513.57, subdivision 1 applies to every residential sale in the regime, and it is defeasible: “[u]nless the prospective buyer and seller agree to the contrary in writing,” the seller is not liable for an error, inaccuracy, or omission “not within the personal knowledge of the seller.” The same subdivision adds that it is no violation “if the seller fails to disclose information that could be obtained only through inspection or observation of inaccessible portions of the real estate or could be discovered only by a person with expertise in a science or trade beyond the knowledge of the seller.” The operative question is what the seller knew, not what you could have discovered, which is why an inspection contingency, not the disclosure statute, is your protection against a defect nobody knew about. Note the scope, both directions. The disclosure act reaches only property “occupied as, or intended to be occupied as, a single-family residence, including a unit in a common interest community as defined in section 515B.1-103, clause (10), regardless of whether the unit is in a common interest community not subject to chapter 515B” (Minn. Stat. § 513.52, subd. 4), so condominium and townhome units are covered. And the act removes fourteen transfer types from the regime, including “real property that is not residential real property,” “a transfer by foreclosure or deed in lieu of foreclosure,” “a transfer of newly constructed residential property that has not been inhabited,” and “a transfer to a tenant who is in possession of the residential real property” (Minn. Stat. § 513.54), which are the deals where AS-IS language is most common.

A commercial buyer gets no Seller’s Property Disclosure Statement, because the disclosure requirements “do not apply to . . . real property that is not residential real property.” That is not the same as no statutory disclosure at all. A commercial seller must still disclose in writing, before signing the purchase agreement, the status and location of all known wells (Minn. Stat. § 103I.235, subd. 1), how sewage generated at the property is managed (Minn. Stat. § 115.55, subd. 6), and any known methamphetamine production on the property (Minn. Stat. § 152.0275, subd. 2). Each of those three carries its own damages-and-fees remedy against a seller who knew and did not disclose, running six years for a well, two years for a sewage system, and six years for methamphetamine production. An owner who knows the property holds an underground or aboveground storage tank must also record an affidavit and “deliver to the purchaser a copy of the affidavit and any additional information necessary to make the facts in the affidavit accurate as of the date of transfer of ownership.” (Minn. Stat. § 116.48, subd. 6.)

Past those, your protection is the contract’s representations plus common-law fraud, and no clause immunizes fraud: “[t]he law should not and does not permit a covenant of immunity to be drawn that will protect a person against his own fraud,” a rule the Supreme Court applied in an arm’s-length commercial contract whose own terms recited that one party “is not relying upon any statement made by the company.” (Ganley Brothers, Inc. v. Butler Brothers Building Co., 170 Minn. 373, 377, 212 N.W. 602 (1927).) The Court of Appeals repeated the principle in a dispute over a commercial office building contaminated with asbestos, stating that “where the major purpose of a contract clause is to shield wrongdoers from liability, the clause will be set aside as against public policy,” though the disclosure duty in that case rested on the parties’ status as partners in a limited partnership rather than on an arm’s-length sale. On that fiduciary footing the court held that the trial court “erred in holding that respondents’ common law duties of disclosure were limited by the Uniform Limited Partnership Act and by the partnership agreement.” (Appletree Square I Ltd. Partnership v. Investmark, Inc., 494 N.W.2d 889, 892-93 (Minn. Ct. App. 1993).) Two limits keep this honest. Silence is not automatically fraud: “[a]s a general rule, one party to a transaction has no duty to disclose material facts to the other,” subject to three circumstances, namely that one who speaks must say enough to prevent his words from misleading, one with special knowledge of material facts the other cannot access may have a duty to disclose, and one in a confidential or fiduciary relation must disclose. (Klein v. First Edina National Bank, 293 Minn. 418, 421, 196 N.W.2d 619, 622 (1972).) And being a sophisticated buyer does not defeat your claim as a matter of law: “[w]hether a party’s reliance is reasonable is ordinarily a fact question for the jury unless the record reflects a complete failure of proof,” and “[t]he listener is not under an obligation to conduct an investigation.” (Hoyt Properties, Inc. v. Production Resource Group, L.L.C., 736 N.W.2d 313, 321 (Minn. 2007).) The Supreme Court’s most recent word on as-is language points the same direction, holding that a seller’s “fraudulent statements about the fitness of the truck . . . are a circumstance that make the ‘as is’ disclaimers of implied warranties in the purchase documents ineffective under Minn. Stat. § 336.2-316(3)(a),” though that decision construes the sale-of-goods disclaimer statute and does not itself govern a real property purchase agreement. (Sorchaga v. Ride Auto, LLC, 909 N.W.2d 550, 557 (Minn. 2018).) Our look at the traps inside an as-is clause shows how this plays out when a build-out is involved.

When can the seller force the sale through specific performance?

Specific performance is a court order compelling a defaulting party to close the transaction rather than pay money damages. Minnesota accords land a “special status . . . as distinguished from other forms of property,” so where an interest in land is involved “inadequacy of damages is presumed, and proof thereof is not required,” and the reason does not turn on the parcel’s size, value, or location: “because there is no open market for land either for seller or buyer, the number of instances where the buyer could get land substantially as satisfactory or where the vendor could make a ready sale to another purchaser is so small as to be negligible.” (Shaughnessy v. Eidsmo, 222 Minn. 141, 150, 23 N.W.2d 362, 368 (1946).) The Supreme Court reaffirmed the framing in 2018, noting that land’s special status means “specific performance is the common remedy for a breach of a contract for the sale of land.” (Christie v. Estate of Christie, 911 N.W.2d 833, 839-40 (Minn. 2018).)

The seller is not shut out. “[I]f real property is involved, specific performance is a proper remedy, even if the other remedies would be adequate,” with the decision resting in the district court’s discretion (Schumacher v. Ihrke, 469 N.W.2d 329, 335 (Minn. Ct. App. 1991)), and the Supreme Court held a seller entitled to a decree of specific performance against a buyer who refused to close (Schwinn v. Griffith, 303 N.W.2d 258, 263 (Minn. 1981)). Sellers pursue it less often for an economic reason rather than a legal one: because land values generally rise, keeping the earnest money usually leaves the seller better off, and “[v]endors rarely utilize the remedy of specific performance because ‘its practical applicability is limited to a breach by a solvent purchaser of depreciating property.’” (Fabian v. Sather, 316 N.W.2d 10, 13 (Minn. 1982).)

Where the agreement’s own remedy clause gives the seller an election between specific performance and liquidated damages, that election closes before the resale. The Fabian vendors were “bound by the contract which they drafted to seek either the equitable remedy of specific performance or the legal remedy of liquidated damages,” so although a seller who sues for compensatory damages “does have the duty to use reasonable diligence to minimize his damages,” those vendors, by selling to a third party, “abandoned their claim for specific performance and are limited to the liquidated damages.” The default clause the court construed preserved specific performance to “either party” only if the action “shall be commenced within six months after such right of action shall arise,” and the court closed with the drafting fix: “[i]f the vendors desired a third remedy of actual damages, they should have included such a provision in the purchase agreement.” Where damages are the chosen path, the measure is “the difference between what defendants agreed to pay for the property and the actual market value at the time of defendants’ breach plus such expenses as plaintiffs reasonably incurred in attempting to mitigate their damages less the amount they have already received as a downpayment.” (Frank v. Jansen, 303 Minn. 86, 95-96, 226 N.W.2d 739, 745-46 (1975).) The benchmark is market value at breach, not the later resale price, and the deposit is credited against the recovery rather than added to it.

Keeping the earnest money is not automatic either. “[A] provision in a contract of this kind calling for a forfeiture of the downpayment upon a breach of the contract will not of itself establish the fact that it is to be considered as liquidated damages,” and “[t]here cannot be both liquidated damages and compensatory damages.” (Frank, 303 Minn. at 93-94.) Even a genuine stipulated sum fails as a penalty when the harm was readily measurable and the amount is out of proportion to it: “[t]he controlling factor, rather than intent, is whether the amount agreed upon is reasonable or unreasonable in the light of the contract as a whole, the nature of the damages contemplated, and the surrounding circumstances.” (Gorco Construction Co. v. Stein, 256 Minn. 476, 482-83, 99 N.W.2d 69 (1959).) A seller’s realistic options when a buyer defaults are practical ones:

Seller remedy on buyer default	What it gives the seller	Main limit
Keep the earnest money	The deposit as the agreed substitute for proving loss	The clause must actually stipulate liquidated damages, the amount must not be a penalty, and taking it forecloses compensatory damages
Sue for damages	Contract price less market value at breach, plus mitigation expenses, less the deposit	Seller must use reasonable diligence to minimize the loss and must prove each item; alternative to liquidated damages, not additive
Cancel the purchase agreement	A clean end to a stalled deal	Statutory notice where the agreement is one the cancellation statute reaches; no statutory step where the agreement cancels on its own terms
Specific performance	A court-ordered closing	Available to a seller, but abandoned by reselling where the contract’s remedy clause gives an election (Fabian), and subject to any suit deadline the contract itself imposes, such as the six-month limit in the Fabian agreement’s default clause

Which option fits depends on the property, the market, and what the contract’s remedy clause permits, and the choice has to be made before the property is relisted. One practical note on the deposit itself: a broker “who returns such deposit to a defaulting purchaser without the seller’s authorization . . . may not recover commission from the seller” (Lake Co. v. Molan, 269 Minn. 490, 499, 131 N.W.2d 734 (1964)), which is why an escrow holder facing a disputed contingency will not release funds without both parties’ written direction. And if you are the buyer trying to hold the deal together while the dispute is decided, the uniqueness presumption alone is not enough for interim relief: “[a] party seeking a temporary injunction to suspend cancellation of a purchase agreement for real property must demonstrate irreparable harm under the Dahlberg factors.” (First & First, LLC v. Chadco of Duluth, LLC, No. A23-0598 (Minn. Ct. App. Dec. 11, 2023).)

What happens when a contingency goes unsatisfied and a party wants out?

It depends on whether a contingency simply failed or a party is in default, and Minnesota treats those two situations differently. If a contingency fails and the protected party terminates inside the window, the closing obligation never matured, so walking away is not a breach. Whether any statutory step is needed then turns on the drafting: where the agreement by its own terms cancels on the unfulfilled condition, it is already canceled, and the parties “may obtain a declaratory cancellation, but are not required to do so.” (Kalenburg v. Klein, 847 N.W.2d 34, 40-41 (Minn. Ct. App. 2014).) Getting the deposit released is the separate step covered above, governed by Minn. Stat. § 82.75, subd. 5(d).

A default is the opposite case, and the flat advice that a seller can never end a purchase agreement with a letter is wrong wherever the agreement was never binding in all its essential terms or cancels by its own terms, a distinction that has nothing to do with whether the deal is commercial. Minn. Stat. § 559.217 reaches only a purchase agreement for “residential real property,” so it is closed to a commercial transaction entirely. Minn. Stat. § 559.21 governs only where the agreement is a binding “contract for the conveyance of real estate or an interest in real estate” that gives the seller a right to terminate, and the test is substance rather than label: the agreement must be one “where both parties are bound by its terms . . . sufficiently certain and complete in its essential terms that ordinarily specific performance will lie,” so where the parties never reached agreement on an essential term the purchase agreement “became null and void” and “notice under section 559.21 to terminate the purchasers’ interest was not needed.” (Romain v. Pebble Creek Partners, 310 N.W.2d 118, 122-23 (Minn. 1981).) The Court of Appeals states the inquiry as “whether a term essential to the final bargain is left open for further negotiations or is dependent on a contingency,” and confirms the counter-example: where the agreement was binding in all essential terms, the seller was required to terminate under the statute with an opportunity to cure. (TNT Properties, Ltd. v. Tri-Star Developers LLC, 677 N.W.2d 94, 103 (Minn. Ct. App. 2004).) That is why the commercial seller’s letter worked in the gas-station sale: “the contract was nullified by its own terms; Amoco was not required to follow the procedures of section 559.21.” (Jones v. Amoco Oil Co., 483 N.W.2d 718, 724 (Minn. Ct. App. 1992).)

Where the statute does apply, it overrides the contract. On a default the seller terminates “by serving upon the purchaser . . . a notice specifying the conditions in which default has been made” (Minn. Stat. § 559.21, subd. 2a), and the statute provides that “earnest money contracts, purchase agreements, and exercised options that are subject to this section may, unless by their terms they provide for a longer termination period, be terminated on 30 days’ notice, or may be canceled under section 559.217,” with that notice required “notwithstanding any provisions in the contract to the contrary” (subd. 4(a)). Read those five words, “that are subject to this section,” as the limit they are. For residential property the second route is usually the operative one, because “[p]urchase agreement” there “means an earnest money contract, purchase agreement, or exercised option whether or not the instrument is subject to section 559.21” (Minn. Stat. § 559.217, subd. 1(b)), and either party may serve a notice “stating that the purchase agreement will be canceled 15 days after service of the notice” where a default or unfulfilled condition exists after the date set for fulfillment and the agreement does not by its terms cancel (subds. 2, 3(a)), or, where the agreement does cancel itself, “confirm the cancellation” by a notice “stating that the purchase agreement has been canceled” (subd. 4(a)). One currency note, because the general cancellation statute has moved recently: the 2024, 2025, and 2026 amendments run to contracts for deed rather than purchase agreements, adding the investor-seller 90-day notice and related subdivisions (2024 Minn. Laws ch. 123, art. 16, §§ 5-9), correcting a cross-reference (2025 Minn. Laws ch. 9, § 2), and adding subdivision 10 effective July 1, 2026 for contracts for deed entered into on or after that date (2026 Minn. Laws ch. 80, § 2). The purchase-agreement rules stated above are current. For the practical steps, see our walkthrough of the mechanics of canceling a purchase agreement.

A purchase agreement is only as strong as the contingencies inside it, and most disputes I see were avoidable at the drafting stage. The contingency clauses define when a buyer can leave, what the buyer must do to keep the protection, and how a stalled deal actually ends. Reading them closely before signing is worth far more than litigating them afterward. For more on how I help Minnesota business owners with property transactions, visit my real estate practice page. If you are negotiating a commercial purchase agreement and want a second set of eyes on the contingency and remedy language, email [email protected] with a brief description of the deal. Please start an intake and conflict check before sending a copy of the draft agreement or other confidential documents.