Tips for Negotiating a Contract Amendment
Most parties can successfully negotiate a change to legal agreements if circumstances change, but here’s a chance to learn from other people’s mistakes – parties who failed to fully understand the contract they currently have.
ORLANDO, Fla. – Buyers, sellers, landlords, and tenants often change the terms of their agreements when their circumstances change. Most of the time, these parties negotiate changes and documents without a hitch. However, when things don’t go as planned, we often hear about the fallout on Florida Realtors Legal Hotline.
Following are some tips gleaned from their experiences. The overarching theme? It’s extremely helpful to understand what the agreement currently provides while attempting to negotiate a change.
Is an amendment the right tool for the job?
What happens if the title agent tells the parties that a title defect needs to be addressed before they can close the transaction? Many times, the buyer and seller simply sign an amendment to extend the closing date. While this isn’t necessarily wrong, it can create some unnecessary wrinkles because it ignores the procedures and timeline that already exist in the contract.
The contract puts the ball in the buyer’s court first. It provides that “Buyer shall have 5 days after receipt of Title Commitment to examine it and notify Seller in writing specifying defect(s), if any, that render title unmarketable.” Just a bit later, the contract provides this ominous sentence: “If Buyer fails to so notify Seller, Buyer shall be deemed to have accepted title as it then is.”
This buyer notice is not a contract amendment – it’s a one-way communication from the buyer to the seller, in writing. Once that happens, the seller has a 30-day window to try and cure the defect. If that’s not feasible despite the seller using reasonable efforts to cure the defect, then the buyer has an option to terminate the contract or give the seller more time (up to 120 more days).
Again, extending the closing date isn’t necessarily wrong, but it’s better for the buyer to use the contract’s existing tool (notices) unless the buyer has a specific reason to reject the contract’s path in favor of their own (extending the closing date).
What happens if the other side doesn’t agree to the change?
Some parties ask what the contract says only after the other side rejects or ignores their proposed amendment. This can be very costly.
One common scenario: A buyer waiting on inspection results asks the seller to extend the inspection period deadline. This makes a lot of sense under the circumstances. That said, what happens if, despite hearing that the seller will agree to it, they’re told the day after the inspection period expired that the sellers changed their mind? The answer is that the inspection period expired, so the buyer is likely out of luck if they want to back out later based on the results of their inspection. There are a few rules in play here:
- The Statute of Frauds provides that an amendment must be in a signed document before it becomes enforceable, so the encouraging verbal update (seller plans to accept) isn’t enforceable.
- This is a “time is of the essence” contract, so deadlines are firm.
- Section 12 provides “Unless Buyer exercises the right to terminate granted herein, Buyer accepts the physical condition of the Property and any violation of governmental, building, environmental, and safety codes, restrictions, or requirements …”
Had the buyer properly focused on the contract while waiting to see how (and if) the other side responded to their request for more time, the buyer would have realized that they faced a decision deadline. They either cancel based on whatever information they have by the deadline, or they go forward with their deposit potentially at risk should their opinion change based on future information.
Are emotions ruining your party’s chances of successfully amending the agreement?
We occasionally hear about parties incensed that the other side snubbed or ignored a requested amendment. “We’ve left ten voicemails, each more demanding than the last, but all we heard back was one word – ‘rejected’ – a day or two later than we needed!”
It’s important to remember that the recipient of a proposed contract amendment can accept, reject, counter, or ignore the request, even if it seems like a routine request. They may have any number of reasons for doing so, and they’re not obligated to share their reasoning. Sometimes, the side asking for an amendment may need to come back with a more attractive offer.
However, if the door slams shut because of personality conflicts, it can be very unfortunate for the side that’s requesting a change.
Joel Maxson is Associate General Counsel for Florida Realtors
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