Hidden Hang-ups of Pre-printed Forms

In real estate transactions, you must be diligent in every document you sign. Konowitz & Greenberg recently settled a lawsuit in which the buyer signed a pre-printed Contract to Purchase form for a piece of commercial real estate. The contract identified the property and set forth a purchase price and sale date. The contract also required the parties to enter into a mutually acceptable purchase and sale agreement. The Contract to Purchase was accepted and signed by the seller. Prior to signing a purchase and sale agreement, the seller notified the buyer that they were no longer interested in selling the property, forcing the buyer to file suit to enjoin the seller from selling the property to anyone else and obtain an order forcing the seller to complete the sale. The law in this area is clear. One cannot simply include language in an offer to purchase stating that the offer is subject to a purchase and sale agreement, particularly when other language in the document suggests that the parties intend an offer to be binding, and have confidence that, if no purchase and sale agreement is signed, then the deal is off. The landmark case in this area is McCarthy v. Tobin. While now eleven years old, the lessons of that case bear emphasis. Among those lessons is Real Estate that a party should consult an attorney prior to signing any form.
Other lessons include:

  • if the parties do not wish to be bound by an offer to purchase, they should say so in the document;
  • if appropriate, an offer to purchase should state that the parties agree to conduct good faith negotiations, but if they fail to execute a purchase and sale agreement, then the offer is null and void; and
  • if there are any specific terms and conditions to be negotiated later, for example, financing arrangements or the physical condition of the property, the document should so state.

Often, all of the facts and circumstances involved in a sale are unknown at the offer stage, making it difficult to provide for all contingencies. It is this uncertainty that makes it imperative that an offer leaves both parties room to negotiate these issues later or even to cancel a deal entirely. Preparing a good Contract to Purchase can be complex and time consuming. However, the clear lesson in these cases is that no matter how expensive preparing a proper offer to purchase may seem, the cost will pale compared to the costs—in time and money—of prosecuting or defending a poorly drafted document.

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>