October 11th, 2021 at 3:27 pm
Question: Should the seller give the inspection reports to Buyer #2 in the manner contemplated? Yes or No?
Answer: The answer to this question is debatable, but my answer would be “no.” It’s true that once the seller is in possession of Buyer #1’s inspection reports, the seller should arguably be able to give them to whomever the seller wants. It’s also true that if Buyer #1 cancels, the seller should give the reports to Buyer #2.
However, under California law, every party to a contract has a legal obligation to act in good faith and deal fairly with the other party. It does seem unfair for a seller to use Buyer #1’s reports to negotiate with Buyer #2 to the possible detriment of Buyer #1’s best interests. After all, if the seller were to ask Buyer #1 for permission to share the reports with Buyer #2, we all tend to believe that Buyer #1 would say “no.” Additionally, the seller can easily negotiate in good faith with Buyer #1, before using Buyer #1’s reports to negotiate with Buyer #2.
That said, if you represent a seller who disagrees with my opinion, that’s fine. Just inform the seller in writing (and get an acknowledgment of receipt) that sharing the reports with Buyer #2 without Buyer #1’s permission is against our advice, and we strongly recommend that the seller consults with the seller’s own attorney concerning that matter as the seller deems appropriate.
-Thank You to Andy Achen (Studio City Office) for suggesting this week’s legal tip!
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