April 2015 Can a Seller's Rejection of the Buyer's Corrected Proposal be Rescinded?

By Douglas K. Marsico, Esq.

Can a buyer ever change their written corrective proposal? The answer is, well, it depends.

A recent article by James Goldsmith, Esq. explores whether a buyer's written corrective proposal during the five-day negotiation period established in the Inspection Contingency of the PAR Standard Agreement of Sale is changeable.

The scenario involved a buyer submitting a written corrective proposal for a $5,000 credit. The seller made a counter offer of $2,500; then the buyer amended his proposal to $10,000. In response, the seller accepted the original proposal of a $5,000 credit. Goldsmith concluded that the Agreement of Sale leaves no room for the buyer to change her corrective proposal during the established negotiation period.

Now, presume the buyer submits a corrective proposal for $2,500 worth of repairs. The seller flat-out rejects it and states, "I'm doing nothing. The buyer is already getting a good deal. Tell the buyer to take it or leave it." (Typical colorful metaphors excluded). The buyer then tenders a notice of termination. Having his "bluff" called, the seller, still within the negotiation period, communicates a full acceptance of the buyer's corrected proposal. Must the buyer now proceed with the purchase even after a full rejection of the corrective proposal and the tendering of a Notice of Termination?

Basic real estate law teaches us that when an offer is rejected, it is no longer capable of being accepted. Depending on the circumstances, this may end negotiations or it may invite a counteroffer. Based on this fact pattern, your immediate reaction may be it was too late for the seller to accept the offer because it was already rejected. If we were in the initial phase of negotiating the Agreement of Sale, the transaction would likely be terminated. Remember, though, in this instance the contract was already formed. The buyer and seller are now negotiating changes to the Agreement of Sale, so this basic tenet may not apply.

The plain language of the PAR Residential Agreement of Sale proscribes a specific negotiation period. The buyer likely does not have the right to terminate the agreement until the negotiation period has ended. During the negotiation period, offers and counter-offers may be extended and rejected between the parties without compromising the seller's right to, ultimately, accept the original proposal, provided the acceptance occurs within the negotiation period. Be aware, even if the buyer's initial written corrective proposal is rejected, the buyer probably does not have the right to terminate the agreement until the Negotiation Period concludes.

As Goldsmith stated, when you go to court, the law is what the judge says it is; and different fact patterns will lead to different conclusions. Until a court says otherwise, consider that once the buyer submits a corrective proposal, his right to terminate the agreement is probably suspended until the end of the negotiation period.

Mr. Marsico is an attorney with Caldwell & Kearns which serves as general counsel to PAR. A portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline.