March 3rd, 2025 at 2:58 pm
Multiple Choice Question: What does the RPA say about this situation? Pick the best answer:
A. The seller is required to sign the Amendment.
B. The seller is not required to sign the Amendment.
C. If the seller does not sign the Amendment, the buyer can serve a Notice to Seller to Perform (NSP).
D. The seller must sign the Amendment under the seller’s obligation to act in good faith and deal fairly with the buyer.
Answer: Answer A is the correct answer! The RPA explicitly says that “Seller shall execute additional instructions, documents and forms provided by Escrow Holder that are reasonably necessary to close the escrow” (see paragraph 19B). The Escrow Amendment in question is reasonably necessary to close, given that Lender B requires the Amendment.
Perhaps the seller will try to argue that the seller never agreed to the switch from Lender A to Lender B. Yet, other than the loan approval letter, we do not even know from the Fact Pattern whether the RPA included “Lender A” by name. Additionally, the RPA allows the buyer to “pursue an alternative form of financing,” and does not allow the seller to “interfere with closing at the purchase price on the COE date (paragraph 3B) even if based upon alternate financing” (see paragraph 6C of the RPA).
Answer B is wrong for the reasons stated above.
Answer C is not wrong, but it’s not the best answer. Serving an NSP merely gives the buyer a possible right to cancel (see paragraph 14D(2) of the RPA). But in this situation, the buyer wants to close escrow, not cancel.
Answer D is wrong. The RPA does not specifically say that the parties must act in good faith and deal fairly with each other. However, the buyer can nevertheless raise bad faith and unfair dealing as possible arguments to convince the seller to sign the Amendment. Even though the RPA does not explicitly say it, every contract in California includes an implied covenant for the parties to act in good faith and deal fairly with each other.
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