Contracts

QUESTION:   Broker questions what happens in the circumstance where a MLS listing makes reference to items that are included or excluded in the sale, however they are not listed in a purchase and sale agreement; specifically a washer and dryer.

RESPONSE:  Generally speaking, in most circumstances, in order for personal property to be included or excluded in a sale, that personal property needs to be referenced in the purchase and sale agreement or an independent standalone document like a bill of sale.  The Idaho REALTORS® Form RE-21, Section 6 lists boiler plate language stating what is included and excluded in the sale.  This section very specifically states “the terms stated in this section shall control over any oral statements, prior written communications and/or prior publications including but not limited to MLS listings and advertisements.”  This language will likely be interpreted by a court to indicate that any personal property offered for sale in a MLS would have to be carried into a purchase and sale agreement in order to be binding.  Best practices are for brokers to always use Section 6, subparagraphs A and B to specifically reference personal property that is important to their clients.  Occasionally there can be considerations related to fraudulent advertising, but those cases would have to be determined on a fact by fact basis.

Like Brokers, the Hotline is not intended to be used as a resolution for disputes between Buyers and Sellers.  Broker should advise client to seek legal counsel if they have questions concerning their rights in this matter.

QUESTION:   Seller specifically stated that a chandelier was excluded from the sale in the MLS listing.  However, the Purchase and Sale Agreement (RE-21) did not list the chandelier in the excluded items. Broker questions which language will control.

RESPONSE:   While the Multiple Listing Service lists property for sale, the actual “offer” to purchase real estate is controlled by the terms of the Purchase and Sale Agreement, in this circumstance a RE-21. The RE-21 includes the following language:

ITEMS INCLUDED & EXCLUDED IN THIS SALE: All existing fixtures and fittings that are attached to the PROPERTY are INCLUDED IN THE PURCHASE PRICE (unless excluded below),and shall be transferred free of liens and in as-is condition. These include, but are not limited to, all seller-owned attached floor coverings, television wall mounts, satellite dish, attached plumbing, bathroom and lighting fixtures, window screens, screen doors, storm doors, storm windows, window coverings, garage door opener(s) and transmitter(s), exterior trees, plants or shrubbery, water heating apparatus and fixtures, attached fireplace equipment, awnings, ventilating, cooling and heating systems, all ranges, ovens, built-in dishwashers, fuel tanks, solar panels, and irrigation fixtures and equipment, that are now on or used in connection with the PROPERTY and shall be included in the sale unless otherwise provided herein. BUYER should satisfy himself/herself that the condition of the included items is acceptable. The terms stated in this section shall control over any oral statements, prior written communications and/or prior publications including but not limited to MLS listings and advertisements. Personal property described in a property disclosure report shall not be inferred as to be included unless specifically set forth herein.  It is agreed that any item included in section 6(A) below is of nominal value less than $100.
(A). ADDITIONAL ITEMS SPECIFICALLY INCLUDED IN THIS SALE: ____________________________________________________
____________________________________________________
(B). ITEMS SPECIFICALLY EXCLUDED IN THIS SALE:
____________________________________________________
____________________________________________________
RE-21, Section 6. (Underline added for reference).

Pursuant to the terms of the legal contract between the parties, the terms of Section 6 will control. The best practice for Seller is to ensure any excluded items get listed in section 6(B) and if they are not listed in the offer, provide Buyer with a counteroffer that specifically sets forth the excluded personal property or fixtures.

QUESTION:   Buyer and Seller have entered into a contract where all of Buyer’s contingencies have expired but Buyer has a serious concern about an item he just discovered on the title report.  Buyer is claiming that Buyer has a right to terminate due to the title being an adverse material fact.  Broker questions if Buyer has a legal way to terminate the Purchase and Sale Agreement.

RESPONSE:  The Idaho REALTOR® Form Purchase and Sale Agreement provides various contingencies for Buyer to inspect the structure, review the condition of title, the CC&Rs and other aspects of the property.  Buyer is strongly encouraged to conduct all these reviews to determine if the property is acceptable to Buyer.  Buyer is also required to terminate within a certain timeframe if Buyer sees an issue.  Buyer can also receive a refund of Buyer’s earnest money if Buyer terminates on time. 

However, if Buyer allows these timelines to expire, Buyer will not have the option to properly terminate the contract.

It is important to distinguish the contract between the Buyer and the Seller and the obligations of real estate licensees.  The statue referring to “adverse material facts” (Idaho Code § 54-2086(1)(d) and (e)) imposes the obligation on licensees to disclose certain known facts about the property.  This obligation does not have any tie to the contractual relationship between the Buyer and Seller.  Even if a licensee failed to make a proper disclosure, the Buyer’s recourse would be to seek discipline through IREC or possibly seek damages through a civil action from the listing Broker; not to terminate the Purchase and Sale agreement with Seller.

It is also important to point out that a Buyer or Seller always have other contract remedies which are not unique to real estate contracts, like failure of consideration, fraud in the inducement, etc., but an analysis of these case specific remedies is outside the scope of the Legal Hotline.  Buyer’s issue may also invoke the concept of “marketable title” which a Seller has an obligation to provide pursuant to Section 10 of the RE-21, however this legal concept is complex and also turns on the specific facts of each circumstance including an analysis of the nature of the cloud upon the title and how severely it affects the value of the property.

Like Brokers, the Hotline is not intended to be used as a resolution for disputes between Buyers and Sellers.  Broker should advise client to seek legal counsel if they have questions concerning their rights in this matter.

QUESTION:   Broker questions what happens to the Section 4 deadline when the closing date gets extended.

RESPONSE:   Section 4 of the RE-21 Purchase and Sale Agreement states:
SATISFACTION AND/OR REMOVAL OF ALL CONTRACT CONTINGENCIES: Unless specifically stated below all contingencies in this Agreement and in any counter offers, addendums or amendments are required to be satisfied, removed or exercised no later than ____ calendar days (seven [7] if left blank) prior to the stated closing date or any extension thereof. Failure of either BUYER or SELLER to exercise any contingency by this deadline shall constitute an unconditional waiver of said contingency. Unless this Agreement is properly terminated under a specific provision of this Agreement prior to the contingency deadline stated above then all parties shall conclusively be deemed to have elected to proceed with the transaction and all Earnest Money shall become nonrefundable except upon an instance of SELLER’s default. In the event any contingency has been waived or a contingency deadline has expired and thereafter closing is extended or rescheduled to occur on a later date, said extension shall not reinstate the waived or expired contingency without a mutually executed written agreement containing language specifically reinstating the same. (Underline and italics added).

The above underlined language automatically extends the Section 4 deadline so long as the closing date is extended prior to the Section 4 deadline.  Given the facts presented to the Hotline, the contract in question was extended after the Section 4 deadline to waive contingencies had passed.  In cases such as these, the italicized language above states that the Section 4 deadline does not reset unless agreed to in writing by all parties.

Like Brokers, the Hotline does not give advice to Buyers and Sellers and is not intended to be used as a resolution for disputes.  Broker should advise client to seek legal counsel if they have questions concerning their rights in this matter.

QUESTION:   Broker represents Seller.  Buyer’s lender is requiring certain repairs to the property in order to finance the home, however they are requesting the repairs after the inspection timeframe has passed.  Broker questions if there is a contractual provision allowing Buyer to force Seller into making these lender required repairs.

RESPONSE:   No, a Buyer can never force a Seller to complete repairs, even if they are lender required repairs.  Buyers can always ask for certain repairs to be completed, but Seller has no obligation to do so, especially if the requests come outside of the inspection contingency timeframe.  The only avenue to request repairs within the Idaho REALTORS® Purchase and Sale Agreement Forms is within the inspection contingency time period. 

Further, the Costs Paid By Section (Section 19) of the RE-21 has the following language:
SELLER agrees to pay up to $                               ($0 if left blank) of lender required repair costs only.

BUYER or SELLER has the option to pay any lender required repair costs in excess of this amount.

According to the facts presented to the Hotline, the blank line was filled in with a $0 in this particular contract.  Either Buyer or Seller has the option to pay lender required repairs costs in excess of the amount written into the blank line, but it is only an option and one side or the other cannot be forced to complete any repairs.

Like Brokers, the Legal Hotline does not provide legal advice to Buyers or Sellers, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Brokerage should advise its clients and customers to seek legal counsel if they have questions concerning their rights or contract interpretation.

QUESTION:   Broker represents Seller.  The parties went under contract on October 3 to close on October 11.  The inspection contingency deadline was left blank and thus defaulted to 5 business days, giving Buyer until October 11 to complete inspections (Monday, October 9 was a holiday and not included in the calculations).  The deadline in Section 4 was also left blank, defaulting to 7 business days prior to closing which would have made Buyer’s date to waive all contract contingencies September 29, prior to the date the parties went under contract.  Buyer ultimately terminated due to an unsatisfactory inspection and Broker questions whether Section 4 would allow Seller to retain the earnest money.

RESPONSE:  Given the facts presented to the Hotline, it is likely that the quick closing date and the lack of attention to the other deadlines in the contract created an ambiguity.  Best practice is to always fill in all blank deadlines with an actual number in order to eliminate any ambiguities.  Black’s Law Dictionary defines ambiguity as:
Doubtfulness or uncertainty of meaning or intention, as in a contractual term or statutory provision; indistinctness of signification, esp. by reason of doubleness of interpretation.
Black’s Law Dictionary 97 (10th ed. 2014).

If a court finds an ambiguity in a contract it will attempt to ascertain the parties’ intent.  Leaving form blanks unfilled makes the parties’ intent even more convoluted.  Filling in blanks in form contracts is always best practice, and failure to do so can cause many difficulties for brokers and clients. 

Like Brokers, the Hotline cannot make conclusive determinations as to the existence or interpretation of ambiguities, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Broker should advise client to seek legal counsel if they have questions concerning their rights regarding the earnest money or contract interpretation.

QUESTION:   Broker represents Seller.  Buyer did not terminate the contract prior to the deadline listed in Section 4 and will not be closing on the property.  Broker questions if by accepting the Earnest Money Seller can also pursue other legal remedies, or if the Section 4 Earnest Money is considered liquidated damages.

RESPONSE:  Section 4 of the Purchase and Sale Agreement (RE-21) states in relevant part:
Unless specifically stated below all contingencies in this Agreement and in any counter offers, addendums or amendments are required to be satisfied, removed or exercised no later than ____ business days (seven [7] if left blank) prior to the stated closing date or any extension thereof. Failure of either BUYER or SELLER to exercise any contingency by this deadline shall constitute an unconditional waiver of said contingency. Unless this Agreement is properly terminated under a specific provision of this Agreement prior to the contingency deadline stated above then all parties shall conclusively be deemed to have elected to proceed with the transaction and all Earnest Money shall become nonrefundable except upon an instance of SELLER’s default. …
RE-21, Lines 72-77.  Underline Added.
When the parties executed the contract, they agreed to make the Section 4 earnest money nonrefundable in the event that Buyer did not terminate the contract prior to the contingency deadline.  The earnest money only becomes nonrefundable upon the expiration of the deadline listed in Section 4; in this case, 7 business days prior to closing. 

The RE-21 also lists the remedies available to a Seller in the case of Buyer default in Section 33:

DEFAULT: If BUYER defaults in the performance of this Agreement, SELLER has the option of: (1) accepting the Earnest Money as liquidated damages or (2) pursuing any other lawful right and/or remedy to which SELLER may be entitled. If SELLER elects to proceed under (1), SELLER shall make demand upon the holder of the Earnest Money, upon which demand said holder shall pay from the Earnest Money the costs incurred by SELLER’S Broker on behalf of SELLER and BUYER related to the transaction, including, without limitation, the costs of title insurance, escrow fees, appraisal, credit report fees, inspection fees and attorney’s fees; and said holder shall pay any balance of the Earnest Money, one-half to SELLER and one-half to SELLER’S Broker, provided that the amount to be paid to SELLER’S Broker shall not exceed the Broker’s agreed-to commission. SELLER and BUYER specifically acknowledge and agree that if SELLER elects to accept the Earnest Money as liquidated damages, such shall be SELLER’S sole and exclusive remedy, and such shall not be considered a penalty or forfeiture. However, in the event the parties mutually agree in writing that any Earnest Money shall become non-refundable, said agreement shall not be considered an election of remedies by SELLER and the non-refundable Earnest Money shall not constitute liquidated damages; nor shall it act as a waiver of other remedies, all of which shall be available to SELLER; it may however be used to offset SELLER’S damages. If SELLER elects to proceed under (2), the holder of the Earnest Money shall be entitled to pay the costs incurred by SELLER’S Broker on behalf of SELLER and BUYER related to the transaction, including, without limitation, the costs of brokerage fee, title insurance, escrow fees, appraisal, credit report fees, inspection fees and attorney’s fees, with any balance of the Earnest Money to be held pending resolution of the matter.

RE-21, Section 33.  Underline Added.

When Buyer failed to terminate the contract prior to the deadline, the earnest money became nonrefundable and therefore it is not considered liquidated damages as stated in the Default section above.  Seller would still have all remedies available to them in the case of Buyer defaulting under the contract.

Like Brokers, the Legal Hotline does not provide legal advice to Buyers or Sellers, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Broker should advise client to seek legal counsel if they have questions concerning their rights or contract interpretation.

QUESTION:   Can a Seller refuse to allow Buyer’s home inspector access to the property because Seller does not like the home inspector that Buyer is using?

RESPONSE:  There is no language in the contracts that allows seller to object to Buyer’s choice of inspectors.  The Purchase and Sale Agreement (RE-21) states in Section 12(A):

BUYER is strongly advised… to make BUYER’S own selection of professionals with appropriate qualifications to conduct inspections of the entire PROPERTY.
RE-21, Lines 170-171.

Regarding the Seller refusing to allow access to the property, the RE-21 also states in Section 12(A):
SELLER shall make the PROPERTY available for inspection…
RE-21, Line 173.
If Seller does not allow Buyer’s home inspector access to the property, Seller could be in breach of the contract.

The Hotline does not get involved in disputes between Buyer and Seller.  Broker may wish to advise client to seek private legal counsel if further issues arise.

QUESTION:   Broker represents Seller.  Seller received an offer and signed the contract but did not deliver it to back to the Buyer right away, Seller was waiting until closer to the expiration of the offer to send it back in case they received other offers.  The Buyer ultimately received the accepted offer after the offer had expired.  Broker questions if the parties have a valid contract.

RESPONSE:  A contract is not fully executed until the other party is made aware of the acceptance.  One party cannot accept a contract in a vacuum, meaning that the acceptance, typically in the form of a signed contract, must be delivered to the other party to create a contract.  Both parties have to be aware of the acceptance for the acceptance to be complete and legally binding.  The Idaho Supreme Court summarizes it as follows:

Formation of a valid contract requires a meeting of the minds as evidenced by a manifestation of mutual intent to contract. This manifestation takes the form of an offer followed by an acceptance. … The acceptance is not complete until it has been communicated to the offeror. Acceptance of an offer must be unequivocal. Generally, silence and inaction does not constitute acceptance. More specifically:

Because assent to an offer that is required for the formation of a contract is an act of the mind, it may either be expressed by words or evidenced by circumstances from which such assent may be inferred, such as the making of payments or the acceptance of benefits. Anything that amounts to a manifestation of a formed determination to accept and is communicated or put in the proper way to be communicated to the party making the offer, completes a contract.

A response to an offer amounts to an acceptance if an objective, reasonable person is justified in understanding that a fully enforceable contract has been made, even if the offeree subjectively does not intend to be legally bound. This objective standard takes into account both what the offeree said, wrote, or did and the transactional context in which the offeree verbalized or acted. 17A Am.Jur.2d Contracts § 91 (2d ed.2008).
Justad v. Ward, 147 Idaho 509, 512 (2009). Emphasis added. Internal citations omitted. 

Given the facts presented to the Hotline, Buyer did not receive Seller’s acceptance of the offer until the day after the offer expired.  Regardless of the fact that Seller signed the Purchase and Sale Agreement during the allotted timeframe, delivery did not happen until the offer had expired.  Both parties would need to agree to revive the offer in order to create a legally binding contract, or Buyer would need to utilize the Late Acceptance section if applicable.  However, in this case, Broker alleges Seller revoked acceptance of the contract prior to Buyer initialing the Late Acceptance clause.  Nevertheless, each transaction has to be analyzed on a case by case basis.  Like Brokers, the Hotline does provide legal advice to Buyers and Sellers.  Broker may wish to advise client to retain private legal counsel if further issues arise.

QUESTION:   According to the facts presented to the Hotline, the Buyer presented the Seller with a RE-10 (Buyer’s Original RE-10) requesting correction of certain items/conditions pursuant to Section 12, the Inspection Contingency, of the RE-21. Seller then responded by agreeing to some of the Buyer’s requests but rejecting others using a RE-10 (Seller’s RE-10).  Buyer is currently negotiating with the Seller to get Seller to modify Seller’s response and did so with another Buyer’s proposed RE-10 (Buyer’s Subsequent RE-10).  Broker questions the process if negotiations fail, specifically Broker questions if Buyer can still accept Seller’s RE-10 so long as it is before the timeframe stated in 12(C)(4).

RESPONSE:   The answer will turn on the precise language used by Seller when responding to Buyer’s Original RE-10, but under typical standards of practice the Buyer can still accept sign and accept Sellers RE-10.  This is because the Sellers RE-10 is irrevocable and further is most likely not considered an offer and thus the Buyer’s Subsequent RE-10 would not constitute a counteroffer that rejects the Seller’s RE-10.  The pertinent part of the RE-21 states:

3)…If SELLER agrees in writing to correct the items/conditions requested by BUYER, then said agreement will become an integral part of this contract. Otherwise, immediately upon a written response from SELLER that rejects BUYER’S requests, in whole or in part, said response is irrevocable without consent of BUYER and BUYER may proceed under 12(C)(4) below.

4).  If  SELLER does not agree to correct BUYER’S disapproved items/conditions within the strict time period specified, or SELLER does not respond in writing within the strict time period specified above, then within_______ business days (three [3] if left blank) the BUYER has the option of 1) negotiating with SELLER to obtain a modification of SELLER’S response 2) proceeding with the transaction without the SELLER being responsible for correcting the disapproved items/conditions stated in that particular BUYER’S notice, or 3) giving the SELLER written notice of termination of this agreement in which case Earnest Money shall be returned to BUYER.  …
RE-21, January 2023 edition.

Pursuant to the facts presented, Seller’s RE-10 was only a partial rejection of a few of the terms on Buyer’s Original RE-10, Seller agreed to some of Buyer’s requests and rejected others.  Seller’s agreement to proceed with Seller correcting only certain items cannot be revoked, thus, Buyer can at any time during the stated time period continue under Option 2 and proceed “with the transaction without the Seller being responsible for correcting the disapproved items.”

Like Brokers, the Legal Hotline does not provide legal advice to Buyers or Sellers, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Most every real estate transaction involves unique facts and circumstances which require specific in-depth analysis to formulate a legal opinion.  The Legal Hotline provides general guidance to Brokers and cannot serve as a substitute for legal advice from an attorney who has access to all the particular facts.  Brokers should advise their clients and customers to seek legal counsel if they have questions concerning their legal rights or contract interpretation.

QUESTION:  Broker questions whether the RE-20 needs both Buyer and Seller signatures to effectively terminate the contract.

RESPONSE:  Having both Buyer and Seller signatures on the RE-20 is best practice, but it is not required.  There are many contingencies within the various Purchase and Sale Agreements that state a party need only notify the other in writing to terminate the contract.  In these instances, two signatures are not required in order to effectuate termination. 

The Hotline is aware of many situations where the non-terminating party simply refuses to sign the RE-20, in which case Broker’s file should reflect that the RE-20 was sent to the other side’s agent or other suitable documentation sufficient to notify the other party of termination.  If a Broker is representing a Seller, Broker can relist the property without having both parties sign the termination. 

If a situation arises where a Buyer or Seller receive a signed RE-20 from the other party but feel as though a breach has occurred, or wish to fight the termination, Broker should instruct client to retain independent legal counsel to advise them of their rights.

QUESTION:  Broker has a Representation Agreement with Buyers who are married.  Only the wife has signed the RE-14.  Broker questions if the agreement is void since both husband and wife did not sign.

RESPONSE:  No.  A representation agreement pertaining to community property is not void simply because one spouse did not sign it.  Idaho law states:

Either the husband or the wife shall have the right to manage and control the community property, and either may bind the community property by contract, except that neither the husband nor wife may sell, convey or encumber the community real estate unless the other joins in executing the sale agreement, deed or other instrument of conveyance by which the real estate is sold, conveyed or encumbered, and any community obligation incurred by either the husband or the wife without the consent in writing of the other shall not obligate the separate property of the spouse who did not so consent; provided, however, that the husband or wife may by express power of attorney give to the other the complete power to sell, convey or encumber community property, either real or personal. 
Idaho Code § 32-912.

Given that a representation agreement is not a contract to sell, convey or encumber the property, only one signature is required. 

The Idaho Supreme Court has also specifically stated:
Therefore we hold that at the time this agreement was executed, a brokerage commission contract for the sale of community property signed and executed by a husband was valid under I.C.  9-508, and the fact that the contract was not signed or ratified by his wife did not relieve him from potential liability. In recognition of the fact that I.C. s 39-912 has since been altered to extend management and control of community property to both husband and wife, it can also be reasonably concluded that under the terms of I.C. s 9-508 a brokerage contract involving community realty need only be signed and executed by one spousal owner and is binding upon that party notwithstanding the absence of the signature of the other spouse.
C. Forsman Real Est. Co. v. Hatch, 97 Idaho 511 (1976).