How Do I Cancel the Contract?
ORLANDO, Fla – Florida Realtors Legal Hotline receives many questions regarding contract cancellation, including when and how a contract can be cancelled – and there’s some confusion over the ability to cancel a contract and use of the Florida Realtors’ Release and Cancellation of Contract form. While one can be used to do the other, they aren’t the same thing.
Let me explain. For the purposes of this article, we will use the language in the Florida Realtors/Florida Bar “AS IS” Residential Contract for Sale and Purchase, more commonly known as “the AS IS contract.”
Here’s the thing: Try as you might, not all sales contracts are going to end up closing. Whether a contract cancellation is based on one party’s contingency or it’s something more severe, such as arguments between the parties over one thing or another, this just happens.
However, when there is a contingency that allows a party to terminate the contract, it’s important to pay attention to that section of the contract to understand what steps must be followed to properly cancel. Why? This is what determines if the contract was properly canceled – or not.
Let’s look at the inspection period language in the AS IS Contract, which is contained in paragraph 12. For the buyer to terminate the contract based on this contingency within the contract, it states, in pertinent part, that the buyer has to “deliver written notice of such election to Seller prior to the expiration of Inspection Period.” In other words, in order for the buyer to cancel the contract, the buyer has to send written notice to the seller that they’re cancelling.
What exactly is “written notice?” It could mean several things, including a Release and Cancellation of Contract – but it isn’t limited to that form alone. A glance at Standard O of the contract clarifies that the written notice can be sent by “mail, personal delivery or electronic (including PDF) media.” This means that the buyer wishing to cancel must send written notice to the seller before the end of the inspection period, and that written notice could be via mail, personal delivery or electronic means.
Based on calls, some members feel that the Florida Realtors Release and Cancellation of Contract form is the only way to terminate a contract under this provision. As we just confirmed, this is not true!
What are some examples of terminating a contract under the inspection section? The most common is via e-mail. The buyer’s agent emails the seller’s agent and indicates the buyer’s intention to cancel. Could a buyer’s agent email a Release and Cancellation of Contract signed by the buyer as a means of cancelling the contract? Sure, that would work too. Both are types of “written notice.” If sending a Release and Cancellation of Contract, it is also helpful for the agent to include a message within the body of the email clearly indicating the buyer’s intent to cancel.
Of course, as Standard O clarifies, the buyer could also send their cancellation via mail or in person – but if using either of these methods, it’s important to note that the buyer should try to secure proof of delivery. Otherwise, the seller could question the timing.
Some of you may be thinking, “Okay, I get it. Why are you even talking about this?” Here is my point: what makes the contract terminated? To briefly recap, the AS IS Contract is terminated under the inspection contingency when the buyer’s written notice to do so is sent to the seller before the end of the inspection period. That is all the language in paragraph 12 requires.
The confusion to the Legal Hotline tends to be the result of using the Release and Cancellation of Contract form as this written notice. How so?
If using a Release and Cancellation of Contract to terminate under the inspection provision of the AS IS Contract – which we’ve now covered is a perfectly acceptable though not mandatory way to terminate under this section – the caller to the Legal Hotline usually says the following: “I sent the Release and Cancellation over to the listing agent on time, but I haven’t receive it back! When does the seller have to sign and send that form back?”
Answer: They don’t. And guess what? For purposes of terminating the contract, it doesn’t matter. Why? Because, as stated before, the only thing the buyer has to do to terminate the contract is send written notice of the intent to do so before the end of the inspection period. Nowhere in that section of the contract does it say the seller has to sign off or agree to end the contract. Nowhere!
As a buyer’s agent, and using my example above, you only need proof that you sent an email to the listing agent about your buyer’s desire to cancel, and it was sent before the inspection-period notification deadline. Beyond that, it’s irrelevant for the inspection contingency section of the AS IS contract whether or not the seller signs the Release and Cancellation you attached to that email.
One small catch
However – yes, there is a slight catch – more times than not, the escrow agent holding the buyer’s deposit will want something in writing from both parties confirming both agree that the buyer can get the deposit back. This is where the buyer will need to get the seller’s signature on the Release and Cancellation or other acceptable form for the closing agent.
But, to clarify: That signature is needed only to get the buyer’s deposit back. It doesn’t affect the buyer’s cancellation of the contract. That was done when the buyer sent written notice before the end of the inspection period of their intent to cancel.
Remember, always look to the language of the section of the contract to see what is required to terminate and how much time a party may have to exercise that right. Knowing the language and options can hopefully avoid any party missing a particular deadline.
Meredith Caruso is Associate General Counsel for Florida Realtors
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