November 29th, 2021 at 3:01 pm
Multiple Choice Question: Is there a binding contract? Pick the best answer:
A. Yes, because the As-Is Addendum is just a disclosure anyway.
B. Yes, but the parties’ agreement excludes both the new provision on BCO#1 and the As-Is Addendum.
C. Yes, if the buyer initials next to the seller’s initials on BCO#1, signs BCO#1 again, signs the As-Is Addendum, and immediately returns both signed documents to the seller.
D. No, because the seller should have issued an SCO#2, rather than alter BCO#1.
Answer: Answer A is wrong. An As-Is Addendum is not necessarily “just a disclosure.” Such addenda commonly include additional rights and obligations for the parties to the agreement. Oftentimes, such obligations are detrimental to buyers. Furthermore, the RPA states that “Addenda are incorporated [into an Agreement] only when Signed by all Parties” (see paragraph 30B of the RPA), whereas the As-Is Addendum in this situation is not signed by the buyer.
Answer B is also wrong. If the seller altered BCO#1, there’s no meeting of the minds and no contract between the seller and buyer.
Answer C is the correct answer! If the buyer counter-signs and returns the 2 documents as described in Answer C, the parties will have a meeting of the minds and be in a binding contract.
Answer D is not the best answer. Although using an SCO#2 would have been the best way for the seller to propose including the As-Is Addendum, neither the law nor the RPA specifically requires sellers to use an SCO form. A judge or arbitrator is likely to enforce the contract described in Answer C, because the parties’ intent to enter into a binding contract is apparent.
-Thank You to Jody Neal (Goleta Office) for suggesting this week’s legal tip!
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