Seller’s Release from Prior Agreement Gives Too Much Power to the First Buyer

Sometimes, there is more than one way to deal with an issue. Let’s look at a situation where Buyer #2 wants to proceed with an Offer on a property.

Looking at the standard form precedents, one would find the following:

Condition – Seller’s Release from Previous Agreement

This Offer is conditional upon the Seller obtaining a release from a prior Agreement of Purchase and Sale. Unless the Seller gives notice in writing delivered to the Buyer personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of __________, 20_____, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction.

The real question, of course is whether you are happy with this. Does this clause make any sense? Are there other alternatives that might work equally well, or better?

The above clause is written as a True Condition Precedent and neither a Seller nor a Buyer would be entitled to waive this condition. That means it must be fulfilled. There’s no other choice!

In order to firm up the deal, we have a two-step process:

  1. The Seller obtains a release from the first Buyer, and
  2. The Seller gives notice to the second Buyer.

True Condition Precedent

Naturally, both parties would like Buyer #1 to be “gone from the deal”. That makes the most amount of sense. It benefits everyone. But, why can’t the Seller just do the deal and accept the risk?

The way this particular clause was drafted, it cannot be waived. It is a requirement. No waiver is permitted.

What is meant by a “release”?

One of the issues with this particular clause is the use of the term “release”. What does that actually mean? Is it the same as a mutual release, that is, using the Mutual Release Form as drafted by OREA? Maybe, and maybe not!

It did not say so, and on that basis I would conclude that some other form of “release” should be sufficient.

Where is the POWER in this Deal?

The power rests with the first Buyer. So, that person whether they are in breach of contract or not has all the power here. That doesn’t make all that much sense.

It would be wise to consider something else.

Brian Madigan LL.B.,

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