November 1st, 2021 at 2:10 pm
Fact Pattern: On Monday, a buyer’s agent submits to the listing agent an offer to purchase using the C.A.R. Residential Purchase Agreement (RPA).
On Tuesday, the listing agent sends to the buyer’s agent nothing more than a one-page C.A.R. Seller Counter Offer (SCO) signed by the seller in paragraph 4. The only term on the SCO is an increase in the purchase price. The listing agent, however, does insert his personal name in the blank line in paragraph 2A of SCO to indicate that he is authorized to receive the return of the SCO on the seller’s behalf.
On Wednesday, the buyer’s agent gets the buyer to sign in paragraph 5 of the SCO, and emails the mutually-signed SCO back to the listing agent.
Because the listing agent was out of town and misplaced his phone, it was not until Thursday that he sees and opens up the email with the fully-signed SCO, and forwards it to the seller.
On Friday, the listing agent fills in the “Confirmation of Acceptance” at the bottom of the SCO with Friday’s date, and sends that to the buyer’s agent.
On Saturday, the listing agent gets the seller to sign the original 10-page offer, including the seller’s initials for the liquidated damages clause and the arbitration clause. Also on Saturday, the listing agent sends to the buyer’s agent those 10 pages signed and initialed by the seller.
Multiple Choice Question: What day was contract acceptance? Pick the best answer:
A. Wednesday.
B. Thursday.
C. Friday.
D. Saturday.
Answer: “Acceptance” of a contract and the creation of a valid and binding contract are specifically defined in paragraph 30A of the RPA. If the final offer or counter offer is an SCO, “acceptance” of the contract occurs when all of the following 4 requirements are met:
1. Seller signs in paragraph 4 of the SCO;
2. Buyer counter-signs in paragraph 5 of the SCO;
3. Buyer’s agent delivers the mutually-signed SCO to the listing agent; AND
4. Listing agent personally receives the mutually-signed SCO if so authorized under paragraph 2A of the SCO; otherwise “acceptance” occurs when the seller personally receives the mutually-signed SCO.
Answer A, Wednesday, is wrong, because, as of Wednesday, the listing agent had not yet personally received the mutually-signed SCO. It may be in the listing agent’s inbox as of Wednesday, but the listing agent had not yet personally received it, as required to create a binding contract under the RPA.
Answer B, Thursday, is the correct answer, because that is the day that all 4 of the above-mentioned requirements for contract formation are met.
Answer C, Friday, is wrong. The “Confirmation of Acceptance” at the bottom of the SCO is helpful for determining the date of acceptance, but only if it’s completed correctly! The listing agent in this situation should have indicated in the “Confirmation of Acceptance” that he personally received the SCO signed by the buyer on Thursday, not Friday.
Answer D, Saturday, is also wrong. Paragraph 1A of the SCO provides that, if paragraphs in the offer require initials by all parties, but they are not initialed, they are excluded from the final agreement, unless specifically referenced for inclusion in the SCO. The listing agent should have gotten the seller to sign and initial the original 10-page offer to send back to the buyer’s side, along with the SCO. Alternatively, the seller’s side could have added a provision in the SCO stating that the liquidated damages clause and arbitration clause are to be included in the final agreement.
-Thank you to Martha Mosier (President) for suggesting this week’s legal tip.
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