Which party gets to select the warranty company?
QUESTION: I represent a buyer. We found a house that my client liked and submitted an Offer to Purchase and Contract. In paragraph 10, the “Home Warranty” paragraph, we checked the second box which reads: “Buyer may obtain a one-year home warranty at a cost not to exceed $______ and Seller agrees to pay for it at Settlement.” After some back and forth, a contract was signed by both parties. No changes were made to paragraph 10. My client ordered a home warranty prior to closing. On the day of closing, the listing agent called me and said she was delivering the keys and the warranty. When I asked “What warranty?” she said the Seller had obtained a warranty and that we should cancel the warranty ordered by my client. My client selected a warranty company that she is comfortable with. In these circumstances, can the seller dictate which warranty the seller will pay for at Settlement?
ANSWER: No. Paragraph 10 gives the parties three different options to choose from in determining how to handle the purchase of a home warranty. Each option has a corresponding check box.
The first option is that no home warranty is to be provided (i.e. paid for) by the Seller.
If the Seller is to pay for a home warranty, one of the other two boxes should be checked. In addition, the maximum cost to be paid by the Seller should be inserted. The only difference between the second and third options is the identity of the person selecting the warranty.
If the second box is checked, it is the Buyer who is given the opportunity to obtain the warranty. By agreeing to this provision, the Seller agrees to pay for any warranty obtained by the Buyer up to the maximum cost set forth.
If the third box is checked, it is the Seller who must obtain and provide a one-year home warranty. In that event, the Seller must disclose in the contract the name of the company issuing the warranty.
In this case, because the Buyer checked the second box, and the Seller signed the contract, the Seller must pay for the warranty selected by the Buyer, up to the agreed-upon cost.
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