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”?

Issues with the Mutual Release Form

One of the problems with the Mutual Release form is that it requires both parties to agree not to sue the other party. Maybe the Seller would like to sue the first Buyer!

It also involves Brokerages. They sign away their entitlement (if any) to the commissions, That would be quite helpful.

Case Law

The Courts have already held that once a Buyer is in breach the Seller may proceed to sell without a release and without notice to the first Buyer. It would give them too much power.

Caution

If you are going to use a clause like this, consider legal advice. What are the rights of the first Buyer? Do you really need this clause? And, why draft it as a True Condition Precedent?

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Comments 2

  1. Post
    Author

    If you have already given someone time, just accept that time and let it run out.

    If it involves a considerable amount of time like the sale of the Buyer’s house, give
    them notice, and let that expire.

    Again, you would not have to secure a Mutual Release.

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