Undelivered Deposit Doesn’t Cancel the Deal

Uniquely & Brilliantly Adorned: DANGER ZONE: Beware of The Blind Leading  The Blind

Question:

I received an email from an agent who presented an unconditional offer for $20,000 over asking saying “My clients found another house they like better. Please withdraw their offer”. We didn’t as it was already in seller’s possession.

Next, the buyer says she is cancelling deal by not providing the deposit. Her lawyer even told her that there wasn’t a binding contract if the buyer doesn’t deliver deposit. Any recourse?

Answer:

The Contract was formed when the Sellers accepted the Buyer’s unconditional Offer prior to the expiration of the irrevocable period. The Offer can’t be “called back” unless it was provided “in escrow”. That would be very rare.

Once in the possession of the Seller or the Seller’s representative, it’s open for acceptance. There is no ordinary rule in law is that the Offer could be revoked at anytime prior to acceptance, but, in this case, that’s not true, since the document has been executed under seal (unless the seals were removed).

The deposit has nothing to do with contract formation. It is simply a term of the contract. If the Seller wishes then they may elect to treat the Buyer in breach of contract for non-payment of the deposit. The Seller may now sue for the amount of the deposit as liquidated damages (whether or not it was ever paid) without proof of damages.

That action in Court is by way of a simplified procedure for a motion for Judgment. That means no trial, no discovery, no witnesses and therefore a route which is considerably less expensive. The minimum amount that the Buyer owes is the deposit, even if the Seller gets more money from the second Buyer.

This was an issue not well-covered in real estate school. It was also a topic not well-covered in law school. The risk is that the inexperienced, inept real estate agent will be involved in the same matter as the inexperienced and inept lawyer. It can happen!

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Comments 3

    1. Post
      Author

      On the other hand, it’s probably good for “business”, if you are involved in litigation. But, it’s rather “sad” for the consumer.

      Brian

  1. I keep telling clients, stop taking litigation advice from real estate lawyers. I respect small town lawyers, as they are more versatile and can close deals and go to court. In a major city, a real estate lawyer closes deals – they convey and they advise, when asked on the contracts and forms. I have seen too many real estate lawyers give terrible advice about multiple issues as they are not litigators. I respect real estate lawyers who tell their clients that they need a litigator

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