Revoke Prior Negotiations Before Accepting a New Offer
A recent Seller narrowly avoided contracting to convey the same property to two different Buyers. Both Buyers could have sued the Seller over the same property. The Seller undoubtedly would have blamed the listing agent, as customers always do. What happened, and how can you avoid falling into a similar situation?
First, the contract language.
The NABOR contract contains language relating to the period of acceptance. Specifically, the contract states, “This offer is revoked if not accepted and the signed offer delivered to offeror, by (a specified time and date).” The contract further states “…Any counteroffer is revoked if not accepted and the signed counter offer delivered to counter offeror not later than____ days [ 2 days if left blank] after delivery of the counteroffer.”
Regardless of the time or date stated in the contract, any offer or counter offer can be revoked at any time prior to acceptance by the other party. With very few exceptions, contract law mandates mutual consideration to create an irrevocable period of offer. With NABOR, the contract form automatically revokes the offer by the specified date. However, the offeror retains the right to revoke the offer or counteroffer earlier.
Practice Tip #1: In contrast, an option agreement highlights the requirement for consideration to create an irrevocable offer. With an option, the optionee (buyer) pays money or other consideration to the optionor (seller) for the promise to sell property if the buyer elects to exercise his option. By paying money (or other consideration) to the seller, the buyer may (but is not required) exercise his option, and compel the seller to convey the property. The seller’s consideration is the promise to sell. In comparison, the standard offer does not include an irrevocable payment to the seller for the right to purchase the property. No consideration to keep the period of offer open exists. Therefore, the offer can be revoked at any time.
So, What Happened Here?
The example referred to in my introduction illustrates the need for a revocation when dealing with more than one buyer. Here is what happened.
Buyer#1 made an offer on a property. The Seller countered, giving Buyer#1 until 5:00pm of that day to accept the counteroffer. Instead of accepting, Buyer#1 countered again, in effect rejecting the Seller’s offer and making a new one. During the phone call in which they countered, the Listing Agent informed the selling agent that the Seller had signed a contract with Buyer#2 – likely a total surprise to Buyer#1 and their agent. If the Buyer hadn’t decided to counter, instead accepting the Sellers offer, the contractual period of acceptance for the Seller’s counteroffer to Buyer#1 had not expired and the Seller could have ended up with 2 contracts for the same property! A litigation nightmare.
The listing agent’s broker mistakenly told him, “First come, first served”. In hindsight, the Seller should have revoked his counteroffer to Buyer #1 before accepting the offer from Buyer # 2. If Buyer #1 simply accepted the Seller’s counteroffer, rather than making another counter; the Seller would have to contend with executed contracts with Buyer #1 and Buyer#2. Two executed contracts at the same time.
Here, Buyer#1 threatened litigation, but ultimately walked away from the controversy.
Practice Tip #2: Remember to revoke any negotiations with a third party, including written contract offers, emails, texts, and oral proposals. Be safe by avoiding legal arguments about exceptions to the Statute of Frauds, estoppel issues, the Electronic Signature Act, and a multitude of creative arguments from an inventive attorney. Revoke everything, even if seemingly unnecessary. The seller will blame the Realtor for failing to provide proper guidance.
The Florida Supreme Court, in Kendel v. Pontious, 261 So.2d 167 (Fla. 1972), discusses the right to revoke, and the importance of the delivery of the revocation to the other party. For an in-depth discussion of the law on revocation and general contract law, click the link to the case. Even better, call us with any questions.
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