Question

What type of clause is inserted in a financing document when the lender agrees to waive the right to a deficiency judgement? A release clause A subordination clause An exculpatory clause A specific clause

Answer 1

Answer:

An exculpatory clause

Explanation:

Exculpatory clause requires that the lender waive the right to a deficiency judgement against the borrower. The word exculpate actually means to exonerate from guilt. It relieves the borrower of personal liability to repay the loan.

An exculpatory clause is a contract provision that relieves one party of liability if damages are caused during the execution of the contract. The party that issues the exculpatory clause is typically the one seeking to be relieved of the potential liability. For example, You go to a restaurant and decide to use the valet parking service. The ticket the valet driver gives you contains an exculpatory clause, which states that the valet company is not responsible for any loss of contents or damage that may happen to your vehicle

Answer 2

Answer: It is called An EXCULPATORY CLAUSE

Explanation: A deficiency judgment is a court ruling against a debtor in default on a secured loan, indicating that the sale of a property to pay back the loan did not cover the outstanding debt in full.

In waiving the right to a deficiency judgement, AN EXCULPATORY CLAUSE is inserted in the financial contract which states that the borrower no longer has a financial liability. It relieves the borrower the personal liability to repay the loan.