COA incorrect
It’s important to make sure that the Confirmation of Acceptance (COA) is properly completed.
Here’s an interesting scenario. Bob the Buyer submits an Offer which is open until midnight the next day. Sam the Seller meets with the Listing agent in the morning and signs the paperwork agreeing to the Offer at 10:00 am.
The Listing agent heads out for a luncheon meeting at noon, and returns to his office at 2:30 pm. The Offer is sent back to the Buyer’s agent at 3:00 pm by email.
New Offer Arrives
The Listing agent becomes aware of a new Offer, this one is for $1.2 million, or $100,000.00 more than Bob’s Offer.
So, what happens next?
Obviously, Sam wants to sell to the new Buyer, Mary. He will profit by an additional $100,000.00 if he does.
First Offer
The first Offer from Bob stated that the deposit was due upon acceptance. That means within 24 hours of acceptance. So, if Bob misses the time limit, Sam would be free to accept Mary’s Offer.
When is the Deposit Due?
Sam signed the Offer at 10:00 am. Then, he immediately signed the Confirmation of Acceptance also indicating 10:00 am.
According to the Listing agent, the deposit would be due at 9:59:59 am the following day.
Second Offer
So, they watched for the deposit, and when it didn’t arrive, immediately accepted Mary’s Offer.
Deposit Payment
Later that day, at 2:00 pm, Bob’s deposit is delivered to the Listing Brokerage. They refuse to accept it, claiming that Sam has already moved on and has accepted another Offer.
Buyer’s Calculation of the Time for Delivery
Bob’s agent is quite surprised. They didn’t hear about the “deal” until 3:00 pm. That would mean that they would have until 2:59:59 pm the following day to deliver the deposit. And, they would be an hour early by their calculations!
Who’s Right?
Acceptance contains two steps:
- Signing the Offer, and
- Communicating to the other side.
The key to start the clock running is the communication. That was the email sent at 3:00 pm. Who really cares when Sam actually signed the Offer! That’s meaningless when it comes to contracts! The key time is the “delivery” of the email at 3:00 pm. That locked in the transaction with the contract. Before that, Sam and his Listing agent were just going about their own business.
Remember what it says in a contract: “Signed, Sealed and Delivered”. Well, this is the “delivered” part.
Why do we have this Confusion?
If you have been in the business for a while, you will recall the Confirmation of Execution. It focused on the time that the last person signed the paperwork. But, who cares! It doesn’t really matter from a contract perspective.
So, it was replaced in 2008 with the Confirmation of Acceptance. But the COA, which was indeed meaningful was introduced without any fanfare. That meant that the COA replaced the COE without any mention.
Parties went about their business without appreciating that there was a difference. The concept of the last person to sign, and just write down the time of Sam’s signature continued.
Most of the time, there would only be a few minutes between the COE time and the contractual COA time. But, of course, 4 hours could make a real difference.
It’s difficult to come across a proper explanation of the Confirmation of Acceptance in the education material.
What should be done?
Assuming, that Seller Sam signs at 10:00 am, then the Listing agent should immediately send a copy of the accepted contract to the Buyer’s agent. Then, stop and make note of that time. If that happens to be 10:10 am, then, the Listing agent should turn to Sam and have him write down 10:10 am in the Confirmation of Acceptance. Now, we have an accurate time!
On the buy side, there’s a problem. When you see the incorrect time, namely 10:00 am, and you didn’t receive it, until 3:00 pm, this is 4 hours out.
You should immediately communicate this fact to the Listing agent, so that there will be no problems later on.
Buyer should Sign Confirmation of Acceptance
The document can be signed by either party, so why not simply leave this COA to be signed by Bob the Buyer? It was received by his agent at 3:00 pm, so that’s the time that needs to be inserted to start the clock ticking.
95% of COA’s would have the INCORRECT Time
Looking at present practices, it’s relatively easy to conclude that 95% of the COA’s in real estate transactions would be incorrect.
Purpose of the Confirmation of Acceptance
The purpose is to set the clock in motion with the contract start time.
It’s not even necessary. Most contracts do not have this type of a provision. It’s helpful, but not required. There’s still a contract with it being completed. The COA is unique to Ontario, however, it should be the correct time, otherwise it can lead to confusion and lawsuits.
Brian Madigan LL.B., Broker