Fact Pattern: Before taking this week’s quiz, you may want to review last week’s Legal Tip for a quick refresher on the Notice to Buyer to Perform (NBP) under the C.A.R. Residential Purchase Agreement (RPA). For this week, we focus on the seller’s right to cancel. Let’s say that a seller properly serves a 2-day NBP requiring the buyer to remove all contingencies by 11:59 p.m. on Wednesday, November 23, 2022. The buyer misses that deadline. The seller should be able to cancel starting at 12:00:01 a.m. on the next day, but that day is Thursday, November 24, 2022, which is Thanksgiving Day and a legal holiday.

Multiple Choice Question: If the seller does not cancel on Thanksgiving Day, can the buyer remove all applicable contingencies on Thanksgiving Day to stop the seller from cancelling? Pick the best answer:

A. Yes.
B. No, because the buyer cannot remove any applicable contingencies after the buyer’s 2-day NBP timeframe has already expired.
C. No, because, if the first day for the seller to cancel falls on a Saturday, Sunday, or legal holiday, the seller can wait until the next business day to cancel.
D. No, because the buyer cannot remove contingencies on a legal holiday. 

Answer: Answer A is the correct answer! In our situation, the buyer was supposed to remove all contingencies by 11:59 p.m. on November 23, 2022. When the clock strikes 12:00:01 a.m. on the next day, think of that moment as the start of a “race to the finish.” It’s a race between the seller who may want to cancel, and the buyer who may want to remove contingencies and keep the deal going. Whoever acts first wins. Additionally, that race shall begin when the clock strikes 12:00:01 a.m. on the “next day” after the buyer misses the 2-day NBP deadline, regardless of whether that “next day” is a weekday, weekend, or legal holiday.

The legal underpinning for this “race to the finish” interpretation is set forth in paragraph 14B(4) of the RPA. It says that, at any time before a “Seller cancels, if at all, [Buyer] retains the right” to remove any remaining contingencies. It further provides that “Once Buyer’s written removal of all contingencies is Delivered to Seller, Seller may not cancel” based on the buyer’s failure to remove any applicable contingencies.

Answer B is wrong. A buyer can remove contingencies at any time before the seller cancels (see paragraph 14B(4) of the RPA).

Answer C is wrong, because we only skip over Saturdays, Sundays, and legal holidays when a party must perform an “act required by the Agreement” (see paragraph 25.I. of the RPA). But a seller is not “required” to cancel after a buyer fails to remove contingencies during the 2-day NBP timeframe. Hence, that first day for the seller to cancel can be on Thanksgiving Day or any other calendar day.

Answer D is wrong, because nothing in the RPA prohibits a buyer from removing contingencies on a legal holiday (or any other calendar day). It’s true that the “last day” for a buyer to remove contingencies before facing cancellation cannot fall on a Saturday, Sunday, or legal holiday (see paragraph 25.I.). But in our situation, that “last day” was Wednesday, November 23, 2022, which was not a Saturday, Sunday, or legal holiday.

Copyright© 2022 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 November 14, 2022. 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.