Must changes to an offer always be initialed and dated?

QUESTION: I emailed an offer on behalf of my buyers to the listing agent using the Offer to Purchase and Contract (Form 2-T). After some verbal negotiating, I changed the amount of the Due Diligence Fee and Initial Earnest Money Deposit on the original offer. The buyers initialed and dated the changes and I resubmitted the offer by email to the listing agent. Later the same day, the listing agent called me to say that the sellers had signed the revised offer. I communicated that to my clients and thought all was well.

However, the next morning the listing agent called and told me that another offer had come in and that the sellers had decided that they wanted to accept it. I asked him how that could be since he’d informed me the day before that the sellers had signed my clients’ revised offer. The listing agent explained that although the sellers had signed the offer, they had not initialed and dated the two revisions. The sellers believe that no contract was formed and they were free to sell to someone else because they had not initialed and dated the changes.

My question is, are the sellers correct?

ANSWER: No. We think a contract was formed when the sellers signed the offer and the listing agent informed you of that fact. In this particular situation, since the original offer was revised before the sellers signed it, their signatures on the offer constituted their acceptance of all the terms and conditions contained in the offer, including the revisions. On the other hand, your buyer’s signature on the original offer was not sufficient to indicate the buyer’s assent to the changes because the changes were made after the original offer was signed. Thus, it was necessary for your buyers to signify their assent to the changes by initialing and dating them.

Notwithstanding our view of your situation, we think that agents should always strive to ensure that the parties have manifested their assent to any changed terms in an offer by initialing and dating them in order to avoid a question being raised about the validity of a contract. According to the Guidelines for completing the Offer to Purchase and Contract (Form 2G), “[e]very change, addition or deletion to an offer or contract must be initialed and should be dated by both Buyer and Seller.” We think that is good advice.

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Filed Under: Contract Law,