Delivery is Needed to Create a Binding Contract

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Beware those late night calls between agents “my seller accepted the offer, looks like we have a deal”.  A deal isn’t a deal until effective notice of acceptance is communicated to the other party. Why?

A basic law of contracts is that “acceptance must be communicated to the Offeror”. And also, that the Offeror (e.g. The Buyer in most cases) can specify the means of acceptance. Due to the complex nature of real estate contracts (and the amount of money involved) most real estate contracts specify the “how” of acceptance and notice of that acceptance, in order to create certainty. In addition, because of the statute of frauds, which requires a sufficient writing signed by the seller to create a binding contract to sell real estate, any acceptance of a seller must be in writing. Acceptance of a contract in Lincoln’s form requires DELIVERY AS ACCEPTANCE. Delivery in general requires that the transmission to the other party (receipt) is verified, whether via hand delivery, snail mail, email, facsimile or electronic signature (DocuSign/DotLoop etc). Thus, official notice AND acceptance occur simultaneously.

How does this play out in a transaction? Between the time of the call from the Seller’s agent saying “we have a deal” and the time the Buyer’s agent gets to the office the next morning the Seller could change his/her mind. So long as the contract with required signatures is in control of the accepting party (which includes the agent), the acceptance can be recalled at any time prior to delivery. So, oral verification of written acceptance ISN’T good enough – you need delivery of the written acceptance on a real estate contract. When the Buyer’s agent calls and asks where the contract is, all the Seller’s agent can do is give the Buyer’s agent the bad news… “we don’t have a contract.”

What is good enough?

The Lincoln Purchase Agreement requires that notice of acceptance is provided by actual delivery of the written accepted purchase agreement and specifies how delivery may be verified.  Simply sending an email or fax without verification of when it was received is not “delivery” under the contract.

Outside Lincoln, the Nebraska Purchase Agreement specifies that the Offer to Purchase will be “automatically null and void unless prior to the time of expiration, Seller’s written acceptance is delivered to the Buyer’s limited agent of their Broker’s office or the Buyer.”

In all cases, an offer or counter offer automatically expires and cannot be accepted after the time period specified in the offer or counter. Delivery of an “accepted” offer after the deadline is not acceptance, rather it is a new counter offer, which “could” be accepted by the other party, should he or she choose to accept it.

The bottom line.  Don’t wait around to deliver that signature! It isn’t a deal until it is delivered.

“Remember, good ethics is good business.”

Shannon R. Harner, General Counsel

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