More on timelines for inspection contingency

A recently published article  in PARJustListed elicited several written responses and quite a few additional comments submitted directly to me. The private comments told me what I have known for a long time: the changes determining contingency deadlines are as much about what starts the clock ticking as anything else. The Standard Agreement is the starting place for defining the obligations of the buyer and seller. The Inspection Contingency (paragraph 12) establishes the number of days from the Execution Date when the inspection contingencies must be satisfied. Most other provisions that impose a timeline also calculate the timeline as running from the Execution Date. Obviously, understanding when and what constitutes the Execution Date is critical to timely performance.

Jim Goldsmith, Esq.

Execution Date is defined in paragraph 5, “DATES/TIME IS OF THE ESSENCE,” as follows:

(C) The Execution Date of this Agreement is the date when Buyer and Seller have indicated full acceptance of this Agreement by signing and/or initialing it.

This is where it gets sticky.  Most offers are countered, therefore there is a time in the life of most agreements when initials and signatures of both parties will be in place but where a change exists that has not been accepted or initialed by one of the parties. To establish the Execution Date, it is imperative that we know when all of the terms have been agreed to by all of the parties. Assuring that any change is not only initialed — but also dated — at the time of initialing lends certainty as to the date when all of the terms have been accepted.

Delivery is another matter altogether. Perhaps the seller accepts (initials and dates) a buyer’s counter offer on Monday evening. If the buyer does not know of the seller’s acceptance until Wednesday morning when the fully executed agreement is delivered to the buyer’s agent, how much time will the buyer have to complete inspections? If the buyer lost those two days to complete the inspections, the buyer is going to have to step on the gas. What if the seller holds the fully executed document for four days? You get the picture. The definition of Execution Date provided by the Standard Agreement makes no exception for tardy delivery, however, we assume that courts will not allow an injustice to occur. But going to the courts for relief is not what we want.

The best solution is for agents to ensure prompt delivery of a fully executed document. In the age of scanning, faxing and emailing, there is no reason why an executed agreement cannot be delivered the day following its execution. When late delivery occurs, the agent who takes delivery (or whose client takes delivery) of the executed document should immediately reach out to the other agent to seek clarification as to what will constitute “Execution Date” for purposes of calculating timelines. Have the buyer and seller execute a simple addendum stating that, “For purposes of this Agreement, the Execution Date shall be deemed [Month, Date].”

We all would like simple explanations and a risk-free agreement where deadlines are never an issue.  If you have the answer, please submit it to the Standard Forms Committee at PAR. Who knows, you may be its next chairperson. Until then, understand that this is an issue that has been dealt with in hundreds of thousands of transactions with a large measure of success. Understanding and dealing with the issues at the earliest opportunity will assure a smooth transaction. An alternative is to modify the agreement by providing a specific date by which contingencies are to be satisfied. This, too, is not 100 percent trouble free. Selecting a date far enough in advance can be difficult when the life of an agreement is likely to involve offers, counter-offers, counter-counters, etc.

One of the recent comments I received in response to my last article was to the effect that anything that takes this many words to explain indicates a problem! Ah, if life were only that easy! The task of shepherding agreements to execution and calculating dates is not a matter than can be made foolproof.  Careful attention and hard work will get you through.