Dating: It's Not Just for Kids Anymore... or: The Importance of Accurately Dating an Agreement of Sale

David Evenhuis, Esq.

'Dating' is an important concept that, for each of us, carries different implications, reactions and consequences. For many of us, the idea of 'dating' will immediately trigger memories (perhaps traumatic ones) of our early teen years and the gaffes that have scarred us to this day!  As we sit here discussing the various niceties and realities of agreements of sale, we may now be ready to talk about dating -- or any other salacious topic -- if for no other reason than to resuscitate our attention! But in the context of this seminar, 'dating' has a far more integral -- and important -- meaning.  The vast majority of residential real estate transactions are shepherded by real estate licensees.  The Real Estate Licensing and Registration Act ("RELRA") and the State Real Estate Commission Rules and Regulations govern many aspects of how licensees are to conduct themselves in transactions, and the essential elements of an agreement of sale are no exception.

The Pennsylvania Code instructs real estate licensees that they must include the following in an agreement for the sale of real estate: (1) the date of the agreement; (2) the names of the buyer and seller; (3) a description of the property and the interest to be conveyed; (4) the sale price; and (5) the dates for payment and conveyance. 49 Pa. Code §35.333. It is not uncommon for licensee to misunderstand the scope of the consequences for failing to satisfy their licensing obligations.  For example, while the failure to include the date on an agreement of sale may constitute a licensing violation, failing to date the agreement does not mean the agreement is unenforceable. (Snow v. Corsica Const. Co., Inc., 459 Pa. 528, 329 A.2d 887 (1974) (failure to date an agreement of sale does not render it incapable of specific performance where that information can be determined by parol evidence)). A contract is formed "when the parties to it 1) reach a mutual understanding, 2) exchange consideration, and 3) delineate the terms of their bargain with sufficient clarity." Company Image Knitware, Ltd. v. Mothers Work, Inc., 2006 PA Super 272, 909 A.2d 324, 330 (Pa. Super. Ct. 2006) (quoting Weavertown Transp. Leasing, Inc. v. Moran, 834 A.2d 1169, 1172 (Pa.Super.2003)).  Thus, failing to "date" the agreement of sale is not fatal to its enforceability.

If the date is not essential to the viability of the agreement, then but for the requirements set forth in the Code, is 'dating' really an issue when using the PAR Standard Agreement for the Sale of Real Estate?  I have served as one of the voices for the PAR Legal Hotline for more than a dozen years, and I can tell you that 'dating' is frequently a problem! The very top of Page 2 of the current iteration of the Agreement of Sale contains the phrase, "By the Agreement, dated ______", and  Page 11 allows for dates following the signatures for Buyers and Sellers.  Frequently, the date Page 2 and the date of the Buyers' signatures are the same. However, the Sellers' signatures can be dated several days later.  Under that scenario, what is the date of the agreement?  It is rare that a seller simply accepts the first offer a prospective buyer submits; when the Sellers change terms of the Buyers' offer, initial the changes, and submit this counter offer to the Buyers for their consideration, what, then is the date of the Agreement? In most residential real estate transactions, neither Buyers nor Sellers are dating the changes made to the Agreement; when the negotiations extend across several rounds, how, then, does one determine the date of the Agreement?

And why is it so important?
The PAR Agreement of Sale is rife with contingencies and obligations that must be completed or satisfied by a date certain.  The date certain is established by using the "Execution Date" of the Agreement of Sale.  The Execution Date is defined as "the date when Buyer and Seller have indicated full acceptance if this Agreement by signing and/or initialing it." Standard Agreement for the Sale of Real Estate, ¶5(C). This paragraph emphasizes that all changes to the Agreement should be initialed and dated. Id. But they rarely are.  Paragraph 13 defines the Inspection Contingency, which in many respects, is the Buyer's 'get-out-of-jail-free' card.  If the Buyer is not satisfied with the results on any of the inspection reports, then the Buyer can terminate the Agreement without penalty.  The timing for inspections and the concordant right to terminate is calculated from the Execution Date.  THIS is a principle reason why 'dating' is so important... at least in residential real estate transactions.  Similarly, Paragraph 2(A)2 requires a second deposit to be made within a specified number of days of the Execution Date. It has become widespread practice for Buyers to tender a nominal initial deposit with their offer, then schedule a second, more substantial deposit, within a few days of the agreement being finalized.  Failure to timely make that second deposit may be a breach of the agreement which, if there is a second offer waiting, may permit a seller to terminate the agreement. This is another reason why 'dating' is so important.

There are other critical dates in the agreement that stand independent of the Execution Date, but are potentially as critical to the transaction.  Paragraph 4(A) identifies the date of settlement. (Arguably, if this date is missing, the enforceability of the agreement may be called into question.)  A related provision is found in Paragraph 2(B), which affects the methodology by which deposits are to be tendered. Paragraph 5(A) may be used to determine when an offer expires.  Paragraph 8 has several dates, critical to the rights of both Buyers and Sellers and the disposition of money paid on deposit.

Dating is never a problem until it is a problem.  Since the vast majority of our clients will consult with us BEFORE signing an offer, and because the vast majority of our clients will allow us to review the agreement of sale BEFORE it is executed (whenever that may be), few of us will ever have to deal with this issue after the fact. The PAR Agreement of Sale is an integrated contract, and the integration clause has been interpreted and its words given effect.  See Blumenstock v. Gibson, 811 A.2d 1029 (Pa. Super, 2002); Youndt v. First Nat. Bank of Port Allegany, 868 A.2d 539 (Pa. Super. 2005). As such, determining the dates after the fact may present its challenges to you and your client.

Caldwell & Kearns and serves as general counsel to PAR. A substantial 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. Mr. Evenhuis is an Associate with Caldwell & Kearns.