Effective Date Dilemmas

Over the last few weeks we have seen several contracts with disputes surrounding the Effective Date.  In each instance the dispute revolved around the date of the last signature or initials next to handwritten changes.

Per paragraph 3 (b) of the FR/BR Residential Contract for Sale and Purchase (“Contract”) the effective date is “the date in when the last one of the Buyer and Seller has signed or initialed and delivered this offer or final counter-offer”.  In each instance referenced above, neither the Buyer nor Seller dated each initial (to a handwritten change) in the Contract and therefore left open room for interpretation as to the actual Effective Date. The good news is that after careful review of supporting communications each buyer’s agent was able to prove the date of the last initial (to a handwritten change) and date of delivery. If not for these savvy agents their clients deposits would have been at risk sooner than anticipated.

In an effort to protect against this type of dispute down the road, either make sure all initials to handwritten changes are properly dated or all counter offers are submitted on Counter Offer forms (and properly dated).  In addition make sure delivery is acknowledged in writing to the other side.

As always, should you have any questions regarding the foregoing, please consult your real estate attorney.

Sincerely,

Berlin-Patten, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com

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2 thoughts on “Effective Date Dilemmas

  1. Here’s an example of an effective date dispute:  Contract last signed by Seller three days before delivered to Transaction Broker on Buyer’s side via fax.  Transaction Broker did not communicate executed contract to Buyer until the day after he received it, so Buyer not aware of acceptance of his offer until 4 days after last signature (Seller’s signature).  Seller claims 15-day inspection period has only 11 days left at time of delivery to Buyer because effective date is the date last signed.  Buyer maintains that the effective date is the later of the last date signed or the date of constructive notice to all parties, regardless of the wording of the contract. Also, Buyer maintains that communication to Transaction Broker does not count as constructive notice to the Buyer in this case, because a Transaction Broker is not an agent of the Buyer.  What do you think?  Good topic for future newsletter?

    Ron Clark

    • Good morning, Ron. This is in response to your comment. If you are using the FARBAR Contract the Effective Date has two triggers:

      1. The date in which the last person sins or initials
      2. Date of delivery.

      In your response below the worst case scenario is the Effective Date was when the Transaction Broker received the contract. Unless otherwise excluded the Contract (under Standards O) deals with notice. Notice to the Broker is just as good as notice to the Buyer/Seller. You are correct in that a Transaction Broker does not represent the parties but rather the transaction per the listing agreement. However, Standard O seems to contradict the listing agreement. We have run into this issue once before. What we did was have the parties confirm the actual effective date immediately so there was no confusion. If I were the Buyer I would operate off of the notion that the effective date was when the contract was delivered to the agent to avoid any possible dispute down the road.

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