Revocation of Offers #563
CATEGORY: Legally Speaking
TAGS: Communication Contract of Purchase and Sale Counter-offers Liability Offer Revocation of Offer
Revocation is the withdrawal of an offer prior to the formation of a binding contract of purchase and sale. For REALTORS®, given the time pressure and risk involved, this represents a significant potential liability and it is an area that should be navigated with the assistance of your managing broker, in addition to your client receiving legal advice.1
When can a party revoke an offer?
Importantly, one can only revoke an offer; you cannot revoke an accepted contract. Therefore, knowing what step you are in the process of contractual formation is important to discerning whether revocation is an option.
Offer and acceptance
An offer is a proposed contract that has not been accepted by the other party. Each offer and counter-offer will be an offer that is capable of revocation.
This legal position becomes much more difficult to discern when an accepted offer has subject conditions. Appropriately drafted conditions will create an enforceable contract that is not revocable (this is not an offer but an accepted contract). Poorly drafted conditions that are subjective, or which relate to the mere “whim and fancy” of one party may fail to create a binding contract. There are many legal cases where REALTORS® have poorly drafted subjective conditions, and judges have found such contracts to be unenforceable. Where your client wishes to revoke or withdraw from an accepted offer (whether it is conditional or not), legal advice should be immediately recommended and sought by your client.2
The parties’ legal position may also be compromised if the contract fails to contain all the essential terms to form a firm and binding agreement, such as a missing material term3, like an outside completion date for a new home build.
Communication of revocation
Revocation must be communicated clearly.4 A real estate contract can be revoked by express communication or clear and unequivocal actions. For example, the presentation of a counter-offer will revoke the original offer and the original offer will no longer be capable of acceptance.5
Timing is crucial when revoking an offer. REALTORS® should convey the message as soon as the decision to revoke is made. It's prudent to immediately send a written follow-up to any verbal revocation of an offer, as revoking an offer verbally may lead to misunderstanding and disputes. It's also helpful to request confirmation of the receipt from the other party to ensure the message has been received and acknowledged.
Having everything documented in writing helps ensure clarity and transparency for the parties involved and will reduce the likelihood of disagreements.
Following revocation of an offer, the parties' actions must be consistent with the revocation, and they should not make any communication or take any steps that would suggest that the offer is still capable of acceptance.6
Where can revocation occur?
There are a number of situations where an offering party may wish to revoke an offer, including:
- Seller X has made a counter-offer to Buyer A (which has yet to be accepted), and Seller X just received a higher and better offer from Buyer B, which they prefer, and are willing to accept and do not want to consider multiple offers.
- Buyer A has made an offer to Seller X (which has yet to be accepted), and a new listing has come onto the market, which Buyer A prefers, and Buyer A wishes to withdraw their offer to Seller X.
- Buyer A has made an offer to Seller X (which has yet to be accepted), and Seller X has informed Buyer A that it is a multiple offer situation, which Buyer A does not want to participate in.
Revocation vs. Home Buyer Rescission (HBRP) vs. Subject Conditions
How you determine which options are available and appropriate for your client to terminate a deal depends on the stage of contractual formation:
|Unaccepted Offer/ Unaccepted Counter-offer||Revocation||No Form – ideally communicated clearly and unequivocally with a time-stamped communication.|
|Accepted Offer within three business days***||HBRP Rescission, unless the property is exempt||Buyer has the right to rescind.|
Rescission must be in writing and contain certain information.
Buyer must pay the Rescission Fee, 0.25% of Purchase Price.
|Accepted Offer with Subject Conditions***||Unable to Fulfill or Waive Subject Conditions||Mutual Release|
Revocation of an offer is an area with a high degree of legal risk, and the interpretation of the case law in this field has been highly fact-driven. In the event your client is considering revoking an offer (especially where the other party may claim they have already reached acceptance), ensure that you recommend that your client seeks legal advice prior to taking additional steps.
|1||Reibin (Re), 2006 CanLII 63679 (BC REC)|
|2||Davidson v Merrick, 2021 BCSC 1847 (CanLII)|
|3||Jung v. GNR Property Management Inc., 2006 BCSC 1692 (CanLII)|
|4||Freeman v. Champagne, SCBC 871193.|
|5||NRS Block Bros. Realty Ltd. v. Kubek,  B.C.J. No. 2599 Coultas J. follows the oft-cited authority of Fridman, The Law of Contract in Canada, 3rd ed. (Scarborough: Carswell, 1994) at ¶56.|
|6||Davis v. Shaw (1910), 21 O.L.R. 474 at 475).|
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