As simple as it may seem, in practice, there is something of a difficulty when it comes to initialling changes to an Agreement of Purchase and Sale.
Reasons
There are several basic reason why initials would be required:
- Signify a proposed change,
- Consent to a proposed change,
- Acknowledge the inclusion of a document or schedule that was not previously attached to the original.
In all cases, you will note that the fundamental purpose of the initials is to draw attention to a difference in the documentation.
- Signify a proposed change
Let’s assume that the Buyer submits an Offer with:
- $920,000.00 as the price,
- A vendor take back mortgage of $50,000.00,
- A closing on 30 June,
- $20,000.00 deposit
The Seller generally likes the Offer, but wishes to make a few changes. The changes are as follows:
- $950,000.00 as the price,
- No vendor take back mortgage at all,
- A closing on 30 July,
- $50,000.00 deposit.
So, the question then, is how “on paper” do you actually effect these changes?
Price
When it comes to the numbers, draw a line through “$920,000.00”, frequently referred to as a “strikethrough”, and then just in the blank space above it, write “$950,000.00” and THEN place your initials beside the “$950,000.00”. It could be to the left, the right, or the top, it doesn’t really matter but it should be there, as in geographically closeby to serve as evidence of the rejection of the Buyer’s price, and proposed Amendment of the terms of the Offer, by way of a Counter-Offer to the Buyer.
Vendor Take Back Mortgage
This reference is located in Schedule “A” and takes up and entire paragraph. It can be deleted by drawing a line through each line, and placing initials at the top right or left.
Another way, would be to draw a “z” through the entire paragraph and write the word “deleted” in one of the margins. Initials are still advisable.
These initials are to denote the change, namely the deletion, and the Counter-Offer, being an Offer without a vendor take back mortgage.
Closing date
The Buyer submitted 30 June, but the Seller would prefer 30 July. The Seller should strikethrough “June” and then write “July” immediately above. Initials may be placed to the right, the left or above the word “July”.
Deposit
When it comes to the numbers, draw a line through “$20,000.00”, frequently referred to as a “strikethrough”, and then just in the blank space above it, write “$950,000.00” and THEN place your initials beside the “$50,000.00”. It could be to the left, the right, or the top, it doesn’t really matter but it should be there, as in geographically closeby to serve as evidence of the rejection of the Buyer’s price, and proposed Amendment of the terms of the Offer, by way of a Counter-Offer to the Buyer.
Price and Deposit in Words
On the standard form Agreement of Purchase and Sale, the price and the deposit also appear in words. So, strikeout, and insert a line above, in writing.
Sometimes Initials Do “Double-Duty”
When it came to the strikethrough for price and deposit as expressed in numbers, the initials do double duty:
- They signify the deletion or the change, and
- They signify the insertion of the new number as the Counter-Offer.
Sometimes Initials Do “Triple-Duty”
Let’s go back to the price and the deposit. We also have the price and the deposit expressed in “words”.
The sequence is words first, number second.
So, if you wished to signify that each were changed, the Seller could place initials in the left margin for the words and the right margin for the numbers. But, is it really necessary? Perhaps not! One set of initials should be sufficient to signify the deletion, replacement, for words and numbers, and the submission of the Counter-Offer.
The Less is More Approach
Remember, we are not trying to follow and note the Seller’s thought process. We are simply trying to document the changes in the agreement.
The reason that there are fewer initials rather than more initials is somewhat twofold:
1) time, and
2) space.
When it comes to time, this was based upon the fact that the person signing would have very high importance, ie. The King. So, we can’t have the King signing unnecessarily.
In this regard, keep the initials to a minimum.
When it comes to space, you may just not have enough room for several “back and forths”. That means some initials may have to do “double duty”, or even “triple duty”.
This process will keep the document “cleaner” and easier to follow. It avoids confusion.
- Consent to a proposed change
On the signback, the Buyer likes and accepts all the changes except one, the closing date, which the Buyer could move to the 15th of July.
So, for all the other changes, the Buyer will place his initials, nearly the Seller’s initials in order to convey “acceptance” of those terms.
However, for the closing date, we will have to go through the same process: strikethrough “30”, insert “15” and initial for the conveyance of the Counter-Offer.
- Acknowledgement
Initials may also signify something else. It might merely mean, that I have indeed noticed a new inclusion with the documents.
Consider a situation where the Buyer inquires whether the Seller has a survey. He would like to attach it to the Agreement of Purchase and Sale. He submits anyways, the Seller looks for a survey, cannot immediately locate one, but does eventually find it.
The Seller, then attaches a photocopy of the survey to the documents. It is initialled. The survey is 20 years old, it is not brand new, but it is new to the negotiating process. So, it is identified. The two sets of initials being from both the Seller and the Buyer are to signify that they both know that the survey is now part of the Agreement. This is simply “awareness” or “acknowledgement”, nothing more.
Assuming that it might be important not to write over the survey, a separate location could be used to “acknowledge” the survey. That could be Schedule “A”, for example.
Initials all over the place
This is a real problem. There may not be enough room, if there are two Sellers and two Buyers and numerous changes all to be made in one location, namely the first page. Here, price, deposit, closing date and the irrevocable clause all appear on the first page. If all four were in flux on the first Counter from the Seller, first Counter from the Buyer, Second Counter from the Seller, Second Counter from the Buyer, followed by acceptance, we would have 5 instances where initials are required as a result of the negotiations, on four locations on the page, each bearing the initials of the two Buyers and the two Sellers. Remembering that the Buyers didn’t initial going in on the first, but the Sellers did have to notify their acceptance, we have 40 individual initials over the page, in addition to the ones at the bottom of the page, that is four more. And, if we initialled the word changes to the price and deposit we would have two additional locations, and 20 more initials. That’s 64 initials on the first pager alone!
Triangles, Squares, Circles
If you are trying to keep things straight, don’t hesitate to use triangles, squares, and circles.
- Use blue ink, and black ink.
- Use coloured highlighters.
- Stack the initials by location.
- Draw a line to another open space on the page.
At least this way, it will be easy to follow the question of negotiations and the arriving ultimately at a final agreement which is shared by all.
It will be very difficult to explain the 40 initials, without some kind of a play-by-play handbook, unless you already have one.
There is no standard practice, make up your own, but be sure to follow it closely, each time. Remember, you will be explaining some 40 to 64 initials on the first page alone to the Trial Judge, so be careful.
Brian Madigan LL.B., Broker