When does the Due Diligence Period end if nothing is written in the “date” blank?
QUESTION: Don’t be mad at me, but my buyer made an offer with no date specified in the blank of paragraph 1(j) of the Offer to Purchase and Contract (Form 2-T), and the seller accepted the offer as written. I thought that if no date was inserted in this particular blank, then the Due Diligence Period would not expire until closing. The listing agent, however, has said that the lack of a date means that there is no Due Diligence Period at all, and he is refusing to release the earnest money now that my buyer wants to terminate. Who is correct? Are we in the Due Diligence Period or not?
ANSWER: We promise that we are not upset with you, and we hope you have learned your lesson. As we have written previously, brokers should either specify a date or write in a specific number of days calculated from a date certain in the contract (such as the Effective Date) upon which the Due Diligence Period will end. You can read our previous articles here and here. We repeat that under no circumstances should “N/A” be inserted in this blank, but as you have unfortunately discovered, leaving that blank unfilled similarly leads to unnecessary confusion and ambiguity in the contract.
As to your question, your buyer can certainly argue that if the parties did not specify an end date, the Due Diligence Period began on the Effective Date and will run until Closing, unless the contract is properly terminated in writing. Paragraph 1(j) of Form 2-T states that the Due Diligence Period begins on the Effective Date, and the blank in paragraph 1(j) is designed for the parties to agree on and identify an end date for the Due Diligence Period. The guidelines to Form 2-T clearly say that the parties should “[i]nsert the date Buyer’s rights to conduct Due Diligence, as defined in Paragraph 1(h), expires.”
That said, the listing agent also has a point. A contract requires that there be a meeting of the minds as to the contract’s essential terms. If the seller did not believe that there was any Due Diligence Period at all by leaving the blank unfilled, we believe the seller could argue that there was not a meeting of the minds.
Although we believe the buyer probably has the better argument here, no other facts presenting, we must stress that we are not a court or your lawyer. Depending on the case, the seller may actually have the better argument. The best practice is to avoid this issue altogether by filling in the appropriate blank so the parties know with certainty when the Due Diligence Period, if any, will end.
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