We have noticed that many sellers and buyers pay little attention to what form contract they use for the purchase and sale of property. There are a couple of solid contract forms that have been developed by both the Florida Association of Realtors and the Florida Bar – does it matter which form you use? Of course! Here are a couple of real-world instances in which the form selected mattered, to the detriment of the parties involved:
- Our litigation team encountered a situation in which an “As Is” Residential Contract for Sale and Purchase was used for the sale of commercial property. What’s the harm there? Generally, the seller of commercial property is not under an affirmative duty to disclose material defects with the property, whereas the seller of residential property does have that duty. The form “As Is” Residential Contract for Sale and Purchase recognizes that duty, and includes a specific representation that the seller knows of no facts materially affecting the value of the property which is being sold. By using the contract which includes that language, the seller undertook a duty which it did not otherwise have – to disclose a significant, known problem with the property. In this instance, had a different contract form been used, the seller’s potential liability would have been more narrow.
- We also encountered a situation in which a residential property was being sold using the FAR/BAR Residential Contract for Sale and Purchase. That contract form does not include a provision which allows the buyer to cancel the contract in its sole discretion within the inspection period, but the “As Is” contract form does include that provision. The parties made several offers and counteroffers to each other, and the seller eventually attempted to accept an offer of the buyers that had already been rejected. When the parties disagreed over whether the disputed offer and acceptance was enforceable, the buyers looked to the form of the agreement to determine if they had the sole ability to cancel the agreement during the inspection period. Because the “regular” form contract had been used as opposed to the “As Is” form, the buyers were not able to rely on that critical inspection period cancellation provision. Fortunately, the parties were able to resolve the dispute amicably.