Counteroffers and the Effective Date in Standard Form 2-T
QUESTION: Yesterday, I received an offer on Standard Form 2-T for one of my listings. My clients liked all the terms of the offer except that they wanted to be able to stay in the property for six weeks after closing. My clients signed the offer, and I called the buyer’s agent to let them know that my clients had signed and that we would soon be sending over a Seller Possession After Closing Agreement (Standard Form 2A8-T). The buyer’s agent said that would be fine, and that the buyers would agree to my client’s staying six weeks after closing.
Today, I delivered a signed Standard Form 2A8-T, and the buyer’s agent just told me that his clients will not sign. I told him that the sellers would just put the house back on the market, but the buyer’s agent told me that I could not market the property since we are under contract. Can I market the property or not?
ANSWER: Yes, but until this situation is cleared up with the current buyers, you should advise your sellers to only accept back-up offers and disclose to every prospective buyer that the property may currently be under contract. You should also advise your sellers to seek legal advice pursuant to Standard of Practice 1-7 should they desire to accept a subsequent offer instead of a back-up offer.
The Offer to Purchase and Contract (Standard Form 2-T) provides that the Effective Date of the contract is the “date that: (1) the last one of Buyer and Seller has signed or initialed this offer or the final counteroffer, if any, and (2) such signing or initialing is communicated to the party making the offer or counteroffer, as the case may be.” This means that once the last party signs, and that signing is communicated to the other party, the contract is effective. The buyer’s agent has a legitimate argument that the parties are now under contract.
That said, basic contract law also mandates that mutual assent, or a “meeting of the minds,” is an essential element of any contract. There must be an agreement on definite terms in order for a contract to exist. Here, the sellers could argue that there was not a meeting of the minds, because it sounds like their acceptance was dependent on being able to stay in the property after closing. However, this argument may not be successful given that paragraph 20 of Standard Form 2-T states that the entire agreement of the parties is encompassed within the signed contract. Your conversations with the buyer’s agent might not help your clients in a legal proceeding.
In this case, the signed Standard Form 2A8-T should have been presented before any signing was communicated to the buyers in order to avoid confusion. Since it is not clear whether the parties are, or are not, under contract, you will need to act as if they are until this situation is resolved.
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