The Best of the Legal Hotline: D&D

A discussion about dates and deadlines


 Tracy Rucka  |    October 14, 2020
Legal Hotline

D&D is not just a game when it comes to the dates and deadlines in the offer. Depending on the context, missing a deadline can put a party at risk for breach of contract, can make the offer null and void, or can cause a party to lose a valuable opportunity. The topic of missed dates and deadlines has sadly been trending on the WRA Legal Hotline lately. The implications are wide and varied depending on which deadline is missed. The following are examples of the serious implications of missed deadlines.  

Drafting essentials

When drafting, the parties and brokers should assure the deadlines in the offer make sense. Avoid mistakes like a loan commitment deadline after closing. When working through an inspection contingency, make sure there is time for a buyer to give notice, and a seller electing to cure has enough time to cure and provide written documentation before closing. Is there time for the parties to realistically meet the timelines set forth in the offer for appraisals and inspections? Also, just because the WB offers now include many default time frames is not an invitation to be lazy. Discuss each provision of the offer with the parties to assure understanding and prepare them to manage expectations. For example, take the time to discuss how deadlines are counted. Most importantly, never assume the other party will later agree to amend a deadline in the offer.   

Remind the parties at the beginning of the transaction about the implications of missing dates and deadlines. When a party misses a date or deadline and time is of the essence, the failure to perform by the specific date or deadline may be a breach of contract. When a buyer fails to meet a specific date or deadline and a seller asks, ‚Äúwhat are my options?‚ÄĚ the licensee can provide a basic explanation of the default provisions or the contract provision included in the offer. This explanation is best provided while showing the seller the actual language in the offer. Sometimes there is a right to terminate; sometimes an offer could be null and void automatically; sometimes the contingency is waived. It all depends on the specific deadline contingency and drafting; examples of these types of variations follow.¬†

Missed binding acceptance

The buyer drafted an offer with a binding acceptance date on the fifth of the month. One of the sellers signed the offer as accepted on the fifth of the month, however the other seller did not sign it until the sixth, and then it was delivered back to the buyer. Has a contract formed in this scenario?   

Not yet. There is no binding acceptance because acceptance by all parties and delivery did not occur within the required deadline. If the acceptance and binding acceptance deadlines are inadvertently missed, all is not lost. The sellers may use a counter-offer to counter back to the buyer on the same terms and conditions to restore the offer. In other words, the best method to clean it up is to draft another counter-offer and have it signed by all parties and delivered back before the new deadline in the counter-offer. Alternately, the buyer may issue the counter-offer to continue the negotiations with the seller.  

Late earnest money

The parties have an accepted offer. The offer calls for nonrefundable earnest money, payable within five days. The buyer verbally asked for an extension of time to provide earnest money. Can the seller terminate the contract by not paying the earnest money? What are the seller’s options?   

Per the preprinted language of the state-approved (WB) forms, if a buyer misses a deadline, the seller can claim the buyer is in default. When faced with a material breach of contract, the seller has choices per the default provisions. For example, the seller may issue a notice of termination, seeking earnest money or actual damages. If the seller decides to just walk away and not make any claim against the buyer, the listing agent could draft a WB-45 Cancellation Agreement & Mutual Release (CAMR). Again, the seller should consult their legal counsel as to their rights.

Potential late reports and approaching deadlines

According to the WRA Addendum B, which was incorporated into the offer, the seller is required to provide well and septic reports. The deadline is only a few days away, and no reports have been provided yet. How might the licensee proceed in this situation?
 
It is prudent practice for the brokers to be aware of and remind the parties of the contractual dates and deadlines. If a party does not appear to be taking steps to meet a deadline, communication is key. In general, to work toward a solution, it is helpful to determine why the party does not appear to be ordering, obtaining or providing the reports per the terms of the contract. Depending on the response, actions may be taken resulting in the timelines being met. If not, the broker will remind the parties of the contract terms and possibly refer to the default provisions and legal counsel, as necessary. 

If it is clear the deadlines will be missed, the brokers will ask the parties what they want to do to move forward. Either party could, for example, provide an amendment extending the deadlines.  Likewise, depending on the motivation of the parties, either party could provide a CAMR. If the deadlines are not met, then depending on the contingency, there may be a claim of breach for failing to timely provide reports; and unless the offer is amended, the contingency will be worked through on its merits. Per the WRA Addendum B, the buyer may make the offer null and void by delivery of written notice, within five days of the deadline, stating the seller failed to provide the reports. Alternately, the buyer may attempt an amendment. An amendment may simply extend the seller’s deadlines. Alternately, an amendment may both extend the deadlines and allow the buyer to obtain the required tests and inspections. Again, it is always the right response for the brokers to refer the parties to counsel as appropriate. 

Financing commitment contingency

The buyer included a financing commitment contingency in the offer. The buyer failed to timely provide a loan commitment. Is the buyer in breach? What are the seller’s options? 

When a buyer misses the deadline for the delivery of the loan commitment, the buyer is not in breach of the contract because the buyer has not yet secured and delivered the loan commitment. However, given the terms and conditions of the Financing Commitment Contingency, the seller has the right to terminate the offer given the buyer missed the delivery deadline. When a loan commitment is not delivered, a listing broker will explain to the seller all sellers have three options regarding the offer; terminate, wait or amend. If the offer was negotiated with a Seller Financing checked, that seller would have a fourth option:

  • Terminate: Per the Seller Termination subsection of the Financing Commitment Contingency, when a buyer has not provided a loan commitment by the stated deadline, it is the seller‚Äôs prerogative to give a written notice of termination. The seller may terminate the offer until the seller has actual receipt of the loan commitment.¬†
  • Wait: If the seller chooses not to provide termination notice, the buyer would be free to continue seeking a written loan commitment. Once the seller is in actual receipt of the loan commitment, the seller‚Äôs ability to terminate is ended. ¬†
  • Amend: The buyer or the seller could initiate an amendment extending the timing for delivery of loan commitment.¬†
  • Seller financing: When a seller includes seller financing as an option in the offer, the buyer‚Äôs failure to timely deliver the loan commitment triggers the seller‚Äôs 10-day window to elect to self-finance the transaction. The seller, wanting to finance the transaction with a mortgage and note matching the terms in the financing commitment contingency, delivers the buyer written notice within 10 days of the deadline for loan commitment. The parties will then proceed to closing. ¬†¬†

Inspection contingency 

There is an accepted offer with an inspection contingency. The buyer’s inspector finished the inspection and provided the written inspection report. However, the buyer missed the deadline to deliver the notice of defects. The buyer wants the home only if the seller cures the defects. Can the buyer walk away in this scenario? 
 
Missing a deadline in the offer does not allow a buyer to just walk away. The WB-11 Residential Offer to Purchase Inspection Contingency provides that the contingency is deemed satisfied unless ‚ÄúBuyer, within _______ days of acceptance, delivers to Seller a copy of written inspection report(s) and a written notice listing the Defect(s) identified in those report(s) to which Buyer objects (Notice of Defects).‚ÄĚ See lines 421-423 of the WB-11. Therefore, unless the parties negotiate otherwise, if the buyer does not provide the Notice of Defects by the deadline, the buyer has agreed to purchase the property in the condition in which the buyer has been made aware. If the buyer missed the deadline and did not provide a Notice of Defects and does not want to purchase the property, the buyer can offer a CAMR for the seller‚Äôs consideration. Alternately the buyer could try to renegotiate with the seller with an amendment, either to extend the inspection contingency deadline or to have the seller repair, replace or otherwise fix defects.¬†¬†

The seller is under no obligation to sign or agree to the CAMR or an amendment as drafted by the buyer. The buyer is encouraged to speak to private legal counsel as to their rights surrounding the contingencies. Helping the parties keep track of timelines will assist the parties to successfully navigate the transaction. 

Tracy Rucka is Director of Professional Standards and Practices for the WRA. 

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