August 7th, 2023 at 1:43 pm
Fact Pattern: A buyer is in a pending sales transaction. The RPA requires the seller to deliver all seller documents to the buyer within 7 days after acceptance (or by Day 7). The RPA also gives the buyer a 17-day contingency to review such documents (or by Day 17). The seller delivers all documents on Day 15, as well as serves a Notice to Buyer to Perform (NBP) to remove the seller-documents contingency.
Multiple Choice Question: Is the NBP valid? Pick the best answer:
A. Yes.
B. No.
C. It depends on whether there are any new discoveries in the seller documents.
D. It depends on whether this transaction falls under the TDS law.
Answer: Answer A is wrong. According to the 5-Day Rule for late documents, if any seller report, disclosure, or information is not delivered timely, the buyer has 5 days after delivery, or the timeframe specified in the agreement, whichever is later, to remove an applicable contingency or cancel (paragraph 14B(3) of the RPA).
In our situation, the buyer originally had until Day 17 to review seller documents. But the seller was supposed to deliver them by Day 7, and failed to do so until Day 15. Because the seller was late, the buyer has 5 days after delivery to review, or until Day 20 (given that Day 20 is later than the original Day 17).
Additionally, the seller cannot serve an NBP until 2 days before the scheduled performance date (under paragraph 14E of the RPA). If the buyer’s scheduled performance date for completing the review of the seller documents is now Day 20 (as explained above), the soonest that the seller can serve the NBP is on Day 18 or 2 days beforehand. Hence, the NBP that the seller actually served on Day 15 is invalid. Answer B is the correct answer.
Stay Tuned! Answers C and D are wrong because new discoveries and TDS cancellation rights fall more squarely under other provisions in the RPA, as we’ll be discussing over the next 2 weeks!
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