Suspensive Condition of Loan: Refusing a Bank Offer Could Cost You Dear

Imagine the scene: you own a house in Montauban, in the Sapiac district. You sign a promise to sell with a buyer, who makes the purchase subject to obtaining a mortgage loan of 500,000 francs (about €76,000). Weeks pass, and the buyer tells you he has received a loan offer, but he refuses it because the terms do not suit him (rate too high, term too short). Consequently, he considers that the suspensive condition has not been fulfilled and that the sale is void. You are left with your unsold property and a waste of time.

But what does the law say? This is exactly what the Court of Cassation decided in a judgment of 2 June 1993. And the answer may surprise more than one buyer.

In this article, we will dissect this landmark decision, understand its reasoning and, above all, see what it changes for you, whether you are a seller or a buyer. Get ready to rethink your assumptions about suspensive conditions.

The facts: a story that happens every day

The case begins in Moissac, a pretty town in the Tarn-et-Garonne region. Mrs. C... signs a promise to sell a residential property. As is often the case, the deed includes a suspensive condition: the buyer must obtain a loan of 500,000 francs to finance the purchase. The contract even states that "loans will be deemed obtained, and the suspensive condition fulfilled, merely by their offer by a banking establishment." A fairly standard clause.

Mrs. C... does indeed receive a loan offer from a bank. But she refuses it, considering that the terms are not satisfactory. She then argues that the suspensive condition has not been fulfilled and that the sale is therefore void. The seller, on the other hand, considers that the offer was made, so the condition is fulfilled, and that Mrs. C... is obliged to buy. The dispute is brought before the courts.

The Court of Appeal of Toulouse rules in favour of Mrs. C..., holding that the refusal of the offer prevents the fulfilment of the condition. But the seller appeals to the Court of Cassation. The Court of Cassation quashes the appeal judgment and remits the case to another court. It states a clear principle: as soon as a loan offer conforming to the characteristics specified in the promise is issued by a bank, the suspensive condition is deemed fulfilled, even if the buyer refuses it.

The reasoning of the court — dissected

To understand this decision, we must return to the basic text: Article 17 of the Law of 13 July 1979 (now codified in Article L. 313-41 of the Consumer Code). This text provides that "the deed of sale of a residential property is only concluded subject to the suspensive condition of obtaining the loan or loans that secure its financing." In other words, the sale is only final if the buyer obtains his loan.

But what does "obtaining" mean? The Court of Cassation gives a broad interpretation: obtaining is achieved as soon as a bank makes an offer, regardless of whether the buyer accepts it or not. In other words, the suspensive condition protects the buyer against the risk of not finding a loan, but not against the risk of not being satisfied with the terms of the proposed loan. What few people know is that the mere fact of receiving an offer, even a refused one, is enough to fulfil the condition.

The lower court judges (the Court of Appeal) had considered that the buyer's refusal was legitimate because the offer did not meet her expectations. But the Court of Cassation censured this reasoning: the suspensive condition is an objective mechanism. If the offer conforms to the contract's stipulations (amount, term, rate), it is deemed obtained. The buyer's refusal is ineffective. Beware, however: if the offer is not conforming (for example, a lower amount), then the condition is not fulfilled.

This decision is a confirmation of previous case law, which tends to protect the seller against bad faith or overly demanding buyers. It makes the buyer responsible: if he wants to reserve the right to refuse a loan, he must expressly provide for it in the promise.

What this changes for you — concretely

For sellers: this decision is good news. If your buyer receives a conforming loan offer, he cannot withdraw by refusing the offer. You can require the sale to be completed by notarial deed. undefined, I have come across cases where sellers lost several months because the buyer refused an offer for trivial reasons. Now you can be more relaxed.

For buyers: be careful. If you sign a promise with a suspensive condition of loan, you must be certain that you are willing to accept any conforming offer. If you have specific requirements (maximum rate, minimum term), have them included in the promise. Concrete example: in Moissac, a buyer had received an offer at 4.5% over 20 years, but he wanted 3.5% over 25 years. The condition was fulfilled; he had to buy or lose his deposit.

For notaries and estate agents: this case law must be clearly explained to the parties. Draft precise clauses, especially on the characteristics of the expected loan. If the buyer wants a right of refusal, it must be stipulated in black and white.

In terms of deadlines: the loan offer must be made within the time limit set out in the contract (usually 30 to 45 days). After this time, the condition fails and the sale is void. But if the offer arrives on time, even if refused, the condition is fulfilled.

Four tips to avoid this type of dispute

• Draft precisely the characteristics of the expected loan: in the promise, mention the amount, term, maximum rate (or margin) and type of loan (repayment, interest-only). Thus, any conforming offer will be deemed satisfactory.
• Provide for a reasoned refusal clause: if you want to be able to refuse an offer, have it stated that the condition is only fulfilled if the buyer accepts the offer, or that the refusal must be motivated by objective reasons (rate higher than X%, excessive processing fees).
• Keep all supporting documents: retain the loan offers, refusal letters, acknowledgements of receipt. In case of a dispute, these documents will prove that the offer was indeed made.
• Consult a lawyer before signing: a professional can check that the suspensive condition clause is balanced and in your interest. In Montauban, many disputes could have been avoided with a careful review of the preliminary contract.

Further reading: related case law and developments

This 1993 decision is part of a consistent line. The Court of Cassation reaffirmed the same principle in a judgment of 16 January 1991 (No. 89-10.578): "the suspensive condition is deemed fulfilled as soon as the buyer has obtained a conforming loan offer." More recently, in a judgment of 12 September 2019 (No. 18-18.576), the Court specified that the buyer must justify active steps to obtain the loan; if he does not make the necessary efforts, the condition is deemed fulfilled.

The trend is therefore clear: the courts protect the seller against buyers who back out. However, an important nuance: if the loan offer is subject to potestative conditions (i.e., depending on the buyer's will, such as a refused life insurance policy), the condition may not be fulfilled. But overall, the rule is that the offer suffices.

For the future, it is likely that the case law will remain stable. Real estate professionals must therefore integrate this principle into their practices.

Checklist before acting

FAQ: frequently asked questions

Can I refuse a loan offer if interest rates have increased since signing the promise?
No, if the offer conforms to the contract. You must accept it, unless a clause provides otherwise. If you refuse, the condition is deemed fulfilled and you are obliged to buy.

What if the loan offer arrives after the stipulated deadline?
The suspensive condition then fails. The sale is automatically void, and you get your deposit back. But be careful: if you let the deadline pass without reacting, you could be considered to have waived the right to rely on the voidness.

What remedies are available if the seller refuses to acknowledge the fulfilment of the condition?
You can apply to the judicial court for a declaration that the condition has been fulfilled and for specific performance of the sale. A lawyer will help you gather the evidence (loan offer, contract).

Can I include a clause that allows me to refuse the offer for any reason whatsoever?
Yes, but it must be clear and unambiguous. For example: "The suspensive condition shall only be deemed fulfilled if the buyer expressly accepts the loan offer." Beware, this clause may be considered potestative and therefore deemed unwritten if it leaves the buyer with complete freedom. It is better to motivate it.

What is the cost of an abusive refusal?
If you refuse a conforming offer and the seller sues you, you risk having to pay damages (for example, loss of chance to sell to another buyer) and legal costs. In Montauban, a similar dispute cost a buyer €5,000.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) could save you months of litigation — and often much more. Book an appointment →