I continue to get calls asking when a contract is considered ratified. The agents also want to understand how the contract effective date is determined and when timing is triggered in the contract on items such as due diligence.
On June 17, 2016, I wrote an post entitled “When Do We Have a Contract.” Today, I am revisiting that post and adding a few comments. My additional comments are in blue.
From June:
In order to have a ratified contract there must be acceptance and delivery of the contract. The party accepting the final offer or counter-offer must accept and deliver the signed contract back to the party making the final offer or counter-offer before the offer or counter-offer is rescinded by the party that made it.
Paragraph 29B of the Central Carolina REALTORS Contract (Midlands) states:
Successful negotiation of this offer will have been completed when one of the Party’s to the negotiation places the final, required signatures and/or initials on this offer. Contract acceptance will occur at the date and time when this Party subsequently delivers a copy of this executed document to the other Party. The Party receiving the executed document will be responsible for filling in the final Contract acceptance date and time on the last page of this Contract.
Similarly, the South Carolina Association of REALTORS contract (Upstate) Paragraph 1 (D) defines the “effective date” as:
The final date upon which a Party to the negotiation places the final and required signatures and/or initials and date on this Contract and Delivers Notice to initially cause this primary Contract to be binding on all Parties.
Essentially, the requirements of acceptance and delivery are the same in both contracts.
Let’s examine how this would work in reality. If John makes an offer to Mary and Mary executes the contract accepting the offer, the contract is not ratified until Mary delivers the contract back to John. Until John receives the contract back from Mary he can rescind his offer, even if Mary has already executed the contract. Once received, John then completes the Contract Acceptance Box (CCRA Contract) and sends a copy back to Mary.
If John makes an offer to Mary and Mary makes a counter-offer which John accepts, the contract is not ratified until John delivers the executed contract back to Mary. Until Mary receives the contract, Mary may rescind her counter-offer. Once received, Mary completes the Contract Acceptance Box (CCRA Contract) and sends a copy back to John.
Once the executed CCRA contract is delivered back to the party that made the final offer, the receiving party completes the Contract Acceptance Box. It is important that this box is completed by the receiving party because the Due Diligence Period is based on the date in this box. If the wrong party completes the Contract Acceptance Box, the Buyer’s Due Diligence and other time frames may be improperly shortened. If the parties fail to complete the box, it does not void the contract. Failure to complete the box could simply foster argument as to when timeframes under the contract began and ended.
There is no box to complete on the SCRs contract. Because there is no final box to complete, issue could arise between the parties as to when delivery of the contract occurred. This is even more problematic if delivery of the contract was delayed for a few days after execution. If the receiving agent notices that the signature dates are different from the day of delivery, the receiving agent should immediately notify the delivering agent in writing of time of receipt and affirmatively state when time periods begin. When in doubt, always document it in writing.
LESS THAN ONE WEEK TO TRES DE MAYO. DON’T FORGET WE HAVE FREE PARKING ACROSS FROM THE TIN ROOF IN THE SENATE STREET GARAGE.
HOPE TO SEE YOU THERE!
