As a little fella, I played community league softball for Beverly Heights in Edmonton. We were terrible, and that is being kind for the sake of all my fellow players. The league had a rule that if one team was leading by seven runs, they would call the game to not cause additional humiliation to the losing team!
At one point our lack of ability caused my dad to no longer take the lawn chairs out of the trunk when he dropped us off at a game because he knew we wouldn’t be long! There is a happy ending to the story though because no other coach wanted our team, a neighborhood mom took over and that year we won the city championship, even missing the provincial title by a couple of runs! I tell the story because despite how bad our team was, we knew to try and avoid strikeouts. This is important in baseball and most of the time in contracts too. Let’s consider the best way to manage term additions or contradictions in real estate contracts.
The Seller and Buyer Agree
The overarching principle in a contract is ensuring the intent of the parties is clear and enforceable upon each other. The role of a REALTOR® in using the standard AREA real estate forms and contracts is to help ensure that a balance is struck in fairness between the buyer and seller and that all the key points of a transaction are covered in full and legally enforceable terms. It does happen though where the buyer and seller agree to something that is legal but is in contradiction with a pre-printed term of the standard AREA purchase contract at which point a decision must be made…to strikeout or not to strikeout? That is the question.
Most of the anxiety surrounding strikeouts is that if it doesn’t get struck out, it remains part of the agreement and causes problems for the contract. Be of good courage, there is a clause in the AREA standard purchase contract, namely 3.1(j) that says the buyer and seller agree that any contract changes that are agreed to in writing will supersede the pre-printed clause. This clause essentially ensures that a clause written into the contract takes precedent over a contradictory pre-printed clause since the assumption is that the parties have made a special agreement in this one area and their intention is purely expressed in the added custom clause. On the flip side of the coin, when a clause is struck out, there is a possibility that another section of the contract may refer to it, but since it no longer exists could cause other issues.
Clear Intent and Reference
REALTORS® are masters of negotiating transactions for clients and can construct terms that accurately reflect the parties wishes. When this clarity is achieved and both parties agree, but there is a contradiction with another term it is best to mention the pre-printed clause as part of the intent for clarity's sake. For example, if a buyer and seller agree to title insurance instead of a Real Property Report with compliance as the AREA standard purchase contract requires, and the seller agrees to pay for a title insurance policy for the buyer, an adequate term stack in the additional terms section would be something like:
This is only an example and legal advice should be sought for your specific situation; however, the example refers to the affected contradictory section without the necessity of a strikeout. Not all strikeouts are equally as bad but without knowing every other section which could be affected by the strikeout in the carefully crafted AREA standard forms, there is the possibility for some frustration to be introduced.
For the Love of Those Who Convey
As a universal best practice, if you are making changes to a contract, you must always have all parties initial the changes for them to be legally enforceable. If you are adding terms to the additional terms section either typed or written, please ensure there are initials on that section as well. In the stack of files, a brokerage, and additionally a law firm handles in a day, the people conveying those documents can miss the terms by human error. If there is an initial on the terms section as well, when additional terms are used, this alerts conveyancers to stop and review the term that the parties have agreed to. It’s a simple final step but can save a lot of headaches. Conveyancers rejoice!
As a final thought, anytime the AREA standard forms are altered to align with the intent of the parties it needs to be done thoughtfully. The standard forms have been carefully constructed to be legally enforceable and it's always a good idea to seek advice from a broker or lawyer to ensure best practice. As a wise man once said, “before you remove a fence always pause for a moment to consider why it was put there in the first place.”
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619