May 13th, 2019 at 3:17 pm
Multiple Choice Question: Can Bob’s mom, as the new assignee, now review the disclosures and cancel the agreement without forfeiting the deposit? Pick the best answer:
A. Yes, a buyer’s cancellation rights under the TDS and other laws cannot be waived.
B. No, paragraph 3 of the C.A.R. Assignment of Agreement Addendum (AOAA) states that the assignee approves “all prior approvals and acts of Buyer.”
C. No, an assignment gives the assignee the rights of the assignor, and nothing more.
D. It depends on whether the parties have initialed the liquidated damages clause.
Answer: Answer A is a true statement, but it is the wrong answer. Although a buyer’s cancellation rights cannot be waived, the mom arguably has no cancellation rights as further discussed below.
Answer B is also a true statement, but it is not the best answer. We do not know from the above Fact Pattern whether the parties have signed an AOAA.
Answer C is the correct answer. An assignee steps into the shoes of the assignor. If the assignor has already reviewed all disclosures and removed all contingencies, he does not have a right to cancel to give to his mom with an assignment. If Answer C wasn’t the correct answer, every buyer who wants to cancel after removing all contingencies would simply try to do an assignment to avoid forfeiting the deposit.
Answer D is wrong. Signing the liquidated damages clause means that the parties have agreed on the amount of the seller’s monetary damages in the event of the buyers’ default. In our situation, the question posed is merely whether the mom has the right to cancel, not how much money the seller can recover in the event of the buyers’ default.
Practice Tip: Even though Answer C is the correct answer, as the real estate agent, you would always prefer using an AOAA to document an assignment. That way, if the assignee tries to assert a new cancellation right, you can simply point to paragraph 3 of the AOAA, rather than try to make a convincing argument about assignment law.
-Thank you to Randy Freed (Santa Barbara Office) for suggesting this week’s legal tip.
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