What type of clause cancels a specified right when a certain condition occurs?

The correct choice is a defeasance clause. This type of clause is used in contracts, particularly in real estate transactions, to indicate that a specific right or obligation will be canceled or rendered void when a particular condition is met. For example, in a mortgage agreement, a defeasance clause often states that once the borrower has fully paid off the mortgage, the lender's right to foreclose is negated, effectively returning ownership of the property free and clear of the mortgage lien.

Defeasance clauses serve as a form of security for borrowers, assuring them that upon fulfilling their obligations, they will no longer be bound by the mortgage, which can be an important aspect of financial planning in real estate transactions.

In contrast, other types of clauses serve different purposes within contracts. An exculpatory clause typically limits liability or removes responsibility for certain actions, while a subordination clause establishes the order of claims in case of defaults or bankruptcies. An acceleration clause allows a lender to demand full payment of a loan if certain conditions are triggered, but it doesn't cancel any rights; rather, it speeds up the collection process. Understanding these distinctions is crucial for effectively interpreting and navigating real estate contracts.