October 30th, 2023 at 2:29 pm
Multiple Choice Question: What form should your buyer use to cancel? Pick the best answer:
A. Withdrawal of Offer (WOO).
B. Amendment of Existing Agreement (AEA).
C. Cancellation of Contract (CC).
D. Any of the above.
Answer: Answer A is not the best answer. As background, the BUO is an addendum to the RPA that a seller and buyer can use to put the buyer in a back-up position. Once the RPA and BUO are signed by both parties, the documents become a binding contract for the seller to sell to the buyer contingent upon written cancellation of any prior contract as specified. Hence, the WOO form would not be the best form to use to cancel, because we generally use the WOO to withdraw an offer or counteroffer before any contract is formed.
Answer B is not wrong, but it’s not the best answer. Functionally speaking, the AEA is just a blank piece of paper.
Answer C is the correct answer. Unlike the AEA which would require the parties to write in the terms of their cancellation, the CC form is already pre-printed for cancellations. The buyer should complete and sign both pages 1 and 2 of the CC. The buyer should also get the seller to counter-sign page 2 of the CC to make it clear that the parties mutually release each other from all claims (see paragraph 2C of the CC).
Answer D is not the best answer. It’s true that the law will give legal effect to a buyer’s cancellation of a BUO, regardless of which form is used, as long as the terms of cancellation are clearly stated. However, the buyer is best off using the pre-printed CC form.
-Thank You to Nicki Marcellino (La Jolla Manager) for suggesting this week’s legal tip!
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