Fact Pattern: A buyer and seller are in a pending sales transaction using the C.A.R. Residential Purchase Agreement (RPA). The buyer submits a Request for Repair asking the seller to do a list of repairs to the property. In response, the seller issues a Seller Response and Buyer Reply to Request for Repair (RRRR). In paragraph 1 of the RRRR, the seller agrees to credit the buyer $5,000 in lieu of any repairs. In paragraph 2 of the RRRR, the seller also requires the buyer to remove all contingencies as identified on the Contingency Removal (CR) form that the seller attaches to the RRRR. Right before the RRRR expires, the buyer counter-signs and returns the RRRR, but does not sign or return the CR form.

Multiple Choice Question: Is the seller required to credit $5,000 to the buyer, and has the buyer removed all contingencies? Pick the best answer:

A. Yes, the seller must credit the buyer, and yes, the buyer has substantially complied with the requirement to remove contingencies.
B. Yes, the seller must credit the buyer, but no, the buyer has not removed contingencies.
C. No, the seller is not required to credit the buyer, and no, the buyer has not removed contingencies.
D. The answer depends on whether the buyer’s failure to sign and return the CR was intentional or inadvertent. 

Answer: Answer A is probably wrong. Paragraph 2 of the RRRR states that the seller’s agreement to credit the buyer “only applies if Buyer . . . removes those contingencies identified on the attached Contingency Removal Form (C.A.R. Form CR) by Signing and Delivering it within the time specified in paragraph 3A below.” That said, the Buyer’s Reply on page 2 of the RRRR does say that the buyer “agrees to Seller’s conditions.” If this issue ends up being litigated or arbitrated, it is possible that a judge or arbitrator will deem that, by counter-signing and returning the RRRR, the buyer has substantially complied with the buyer’s obligation to also sign and return the CR.

Answer B is likely to be wrong, given the “only applies if” language in paragraph 2 of the RRRR (as discussed above). Additionally, it is unlikely that a judge or arbitrator will hold the seller responsible for the credit without holding the buyer responsible for removing contingencies. A buyer should not be able to take that kind of advantage of the buyer’s own failure to sign the CR.

Answer C is the best answer. Based on the plain reading of “only applies if” in paragraph 2 of the RRRR, the seller should not be required to credit the buyer, and the buyer has not removed contingencies. Additionally, paragraph 3A of the RRRR says that the seller’s proposal “shall be deemed revoked,” unless copies of the RRRR, and, if applicable, the CR, are both signed and delivered to the seller within the specified timeframe.

As a practice tip for listing agents, when the buyer’s time to respond to the RRRR has expired and the buyer has not signed nor submitted the CR with the RRRR, the seller may want to just reconfirm in writing to the buyer’s side that the seller deems that the RRRR is revoked. Also, as another practice tip, the seller in this situation may want consider serving a 2-day Notice to Buyer to Perform to remove contingencies if the contingency periods have expired or are about to expire within the next 2 days (see paragraph 14E of the RPA).

Answer D is wrong. The RRRR does not make any distinction between an intentional or inadvertent failure to attach the required CR form. However, as a practice tip to buyers’ agents, if the failure to attach the CR was inadvertent, the buyer may still have time, before the RRRR expires, to submit the signed CR to the seller.

-Thank You to Simona Giuffrida (Rancho Bernardo Office) for suggesting this week’s legal tip!

Copyright© 2023 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of August 28, 2023. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals. Written by Stella Ling, Esq.