Timing is Everything #482
CATEGORY: Legally Speaking
TAGS: Communication Contract of Purchase and Sale Time is of the Essence Clause
In today's busy marketplace, there is a greater risk of mistakes being made regarding dates and times in a contract, amendment, or other agreement for the sale or lease of land. It is of critical importance that licensees carefully review agreement terms with their clients to avoid simple, but costly date and/or time errors.
Have you ever written a cheque (I know, a foreign concept these days) in January, and mistakenly put the wrong year? It is not uncommon, particularly around that time of year. While usually the mistake is easily rectified, the consequences to licensees making this mistake on a contract of purchase and sale can be significant.
Consider the following: a buyer writes an offer for a property in October 2015 with a completion date of April 15, 2016. The seller, seeking completion before the New Year, instructs his licensee to counter the buyer's offer changing the completion date to December 15, 2015. The licensee, in changing the completion date to December 15th, neglects to change the year to 2015, leaving the completion date as December 15, 2016. While one would hope the mistake to be quickly acknowledged and rectified by the parties, some buyers will seek to take advantage of the error.
Failing to implement a good diary system may cause a licensee to miss key dates, such as subject removal dates, resulting in a buyer losing the property they desperately wished to buy. Consider this scenario: a buyer wishes to acquire a property to redevelop. The buyer's licensee writes an offer which includes various subject conditions to be waived or removed within 45 days. The licensee fails to contact the buyer prior to the subject removal date with the result that subjects are not waived or removed within time. The seller then maintains the contract is void, exposing the licensee to a claim for damages by the buyer.
Failure to communicate written acceptance of offers or counter-offers within the time specified in the contract may also enable a party to argue the contract is unenforceable. In a recent case, a seller accepted the buyer's counter-offer in writing, but the seller's written acceptance was allegedly not communicated to the buyer within the time specified in the contract. The buyer maintained the contract was unenforceable. Licensees should recall that Section 5-4 of the Real Estate Council Rules requires a licensee to promptly deliver a copy of the signed acceptance of any offer to each of the parties to the contract and to the related brokerage of the licensee.
Confusion regarding the time or date by which a term, condition or other event must occur will also increase the risk of a buyer or seller taking the position that the contract is unenforceable. If an event is to happen within a number of days or a number of hours, care should be taken to document, in writing, when the time period starts to run and end. Failure to clarify the start and end times or dates can result in one of the parties challenging whether an event occurred within the time specified in the contract.
Licensees can avoid lawsuits, professional complaints and harm to their professional reputation by:
- Ensuring subject removal dates and other important dates are properly recorded and tracked;
- Ensuring acceptance of any offer/counter offer within the time specified in the contract and written communication of that acceptance within that time;
- Clarifying the time/date by which an event must occur, be it subject removal, payment of a deposit or compliance of a fundamental term or condition, and ensuring all parties have the same understanding of that time/date, and;
- Ensuring extensions of time are obtained and agreed to in writing by all parties before the original deadline expires.
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