Here’s an interesting clause found among some Schedule B’s:
“Once this Agreement becomes unconditional, should the Buyer fail to complete this agreement on the completion date, at no fault of the Seller, the deposit, shall be deemed to be released by the Buyer and paid forthwith to the Seller by the deposit holder, without deduction. Such payment shall be in part-satisfaction of the Seller’s damages and Seller reserves all of Seller’s right to claim further additional damages against the Buyer. Under no circumstances shall this amount be recoverable by or paid back to the Buyer. This clause shall constitute the Buyer’s irrevocable consent to release such deposit and no further written release shall be required.”
Let’s read it in more detail:
“Once this Agreement becomes unconditional,
should the Buyer fail to complete this agreement on the completion date,
at no fault of the Seller,
the deposit, shall be deemed to be released by the Buyer and
paid forthwith to the Seller by the deposit holder, without deduction.
Such payment shall be in part-satisfaction of the Seller’s damages and
Seller reserves all of Seller’s right to claim further additional damages
against the Buyer.
Under no circumstances shall this amount be recoverable by or paid back to the Buyer.
This clause shall constitute the Buyer’s irrevocable consent
to release such deposit and no further written release shall be required.”
Let’s add some commentary:
“Once this Agreement becomes unconditional,
should the Buyer fail to complete this agreement on the completion date,
at no fault of the Seller, (the transaction may not close due to Buyer’s fault, Seller’s fault, or third party’s fault, including agents of the Seller)
the deposit, shall be deemed to be released by the Buyer and
paid forthwith to the Seller by the deposit holder, without deduction. (someone is going to have to make a decision here, whose fault was it)
Such payment shall be in part-satisfaction of the Seller’s damages and (that’s what the law says, assuming a Judge concludes that the deposit is to be forfeited)
Seller reserves all of Seller’s right to claim further additional damages
against the Buyer. (no reservation whatsoever is necessary here, that’s already the law)
Under no circumstances shall this amount be recoverable by or paid back to the Buyer. (that’s pushing the envelope, maybe the Judge would see things otherwise)
This clause shall constitute the Buyer’s irrevocable consent
to release such deposit and no further written release shall be required.”
(the question naturally is whether or not this would coincide with the Judge’s decision, if not, then, we have breach of trust on the part of the Trustee holding the deposit)
This clause is interesting, but still falls short of its objective which was to get the money moved over to the Seller asap.
Brian Madigan LL.B., Broker
Comments 4
Only Lawyers can read between the lines, now that you broke it down,
this rephrased clause is more complicated, law suits waiting to happen many parties.
Author
Too many different clauses, that often have little or no meaning.
Nice that you pulled this clause apart and poked holes in it, but it would have been better to provide a solution rather than just commenting on the problem.
Your last sentence, “This clause is interesting, but still falls short of its objective which was to get the money moved over to the Seller asap.” begs the question ‘what would a better clause have been?’.
Author
Thanks for your comments.
That’s what I do too. I provide comments for real estate agents. I want them to think for themselves and review clauses carefully.
I provide Courses for real estate agents. In fact, I have over 50 Courses including one on “Deposits” and another on “Writing Clauses”.
So, for any of the real estate agents who take my Courses, they should have their solutions.
There is no one clause fits all solution.
Brian