Remedies for Breach, Counter Offers, Statue of Frauds & Defects

Termination of Agreement of Purchase and Sale Mutual agreement (see agency termination) Performance (see agency termination) Impossibility of performance / frustration (see agency termination) Operation of law Bankruptcy/alteration by one party without consent of the other - you have a firm offer but you become bankrupt before you close Breach Breach involves a failure to fulfill an obligation under a contract – one party fails to uphold their end of the bargain

Remedies for Breach Recession Damages Recession = cancellation or revocation of a contract which is subsequently set aside For example, the court may rescind a contract on request of the buyer if the builder is unable to complete the renovation work due to financial difficulties Damages Damages = compensation for loss Most common remedy Party which breaches a contract is liable to pay damages to the party that is wronged

Remedies for Breach Quantum Meruit Specific Performance Quantum meruit = “paid what is deserved” You get paid for whatever work you were able to complete Courts determine a reasonable sum of money for the services or work you performed Specific Performance Specific performance = a court order that makes a party that breaches the contract to do what the contract required them to do It is a discretionary remedy so the court can decide when it wishes to grant it; it is not an absolute right It will be awarded only if damages are not adequate remedy

Remedies for Breach Injunction = order of the court restraining an offending party from doing that which they were refrained from doing by the contract

Counter Offers Any subsequent offer made after the first offer (original offer) is called a counter offer Once you receive an offer, you can either: Send a counter offer where you insert new terms etc. Amend the original offer (i.e. change price, terms etc.) and send it back Draft a new offer if the offer is significantly changed and it would be confusing to amend the original offer

Counter Offers Once an offer is rejected, it has ended and cannot subsequently be accepted But the offeror can reopen the original offer An offer lapses if it is not accepted within the irrevocable period The same applies for counter offers, although the counter offeror typically changes the irrevocable period Acceptance must be communicated in the manner the offer prescribes for notices Offers cannot be withdrawn by the person making the offer before the expiration of the irrevocable period Under common law, the offeror may withdraw the offer at any time prior to acceptance if it is not made under seal

Counter Offers If the seller accepts an offer in a multiple- offer situation, the other buyers can look for other properties Once an offer is countered, the party which receives the offer can wait till the last minute before deciding what to do with it The seller will be unable to negotiate the contract with other parties till the irrevocable period ends This is why the salesperson representing the seller should make sure the revocable period is reasonable and does not let the buyer take advantage of the seller

Counter Offers In case of multiple-offer situations, the seller may reject all offers and request that the buyers improve their offers, resulting in the buyers walking away from the negotiating table You cannot accept or counter multiple-offers If you have one property to sell and accept or counter more than 1 offer at a time, there is a possibility that you will enter into multiple contracts to sell the same property, resulting in legal issues Brokers must advise clients as to the best strategies and help them make an educated decision

Statute of Frauds Statute of Frauds requires that all real estate contracts be in writing for them to be enforceable at law They don’t need to be written on the Agreement of Purchase and Sale Statute of frauds also requires that the purchase price be written on the Agreement of Purchase and Sale

Defects Latent Defect = fault in the property that could not have been discovered through inspection prior to sale This type of defect is not readily visible/observable E.g. interior brickwork and wood beams cannot be assessed fully Patent Defect = fault in the property that can be discovered prior to sale This type of defect is readily visible/observable E.g. you can see that roof shingles need to be replaced from a simple roof inspection

Defects A buyer wants to purchase a property. The basement of the property is has a significant structural defect. There is evidence of a broken window pane and water leakage. This was hard to view when the property was seen before making an offer because of the finished basement walls. The buyer bought the property through a cooperating brokerage house. The listing salesperson had knowledge of the problems but the seller’s salesperson was not informed. Problem arises because listing salesperson failed to disclose broken window (patent) and foundation crack (latent) defects