Remedies Scenarios-2017 AAR PC

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Scenario #1

After the close of escrow the buyer discovers that the seller has removed the built-in range/oven. The cost to replace the built-in range/oven will be $1,500. Can the buyer immediately file a claim for $1,500 against the seller in small claims court?

Answer:
Yes. Section 7 Lines 310-314 of the AAR Contract a three-day Cure Period Notice is required for the non-compliance of “any provision” of the AAR Contract DURING THE ESCROW PERIOD. Therefore, prior to filing a lawsuit in small claims court, the buyer must have closed the transaction and then would proceed to file a claim against the seller. However, it would be hard to prove that the seller took the range. 

Scenario #2

Under the Contract, the refrigerator was to be conveyed to the buyer. At the walkthrough prior to closing, the refrigerator was in the home. After closing, the buyer discovers that the refrigerator has been wrongfully taken by the seller. The buyer delivers a three-day Cure Period notice to the seller. After the three-day Cure Period, the seller still refuses to deliver the refrigerator to the buyer. Can the buyer cancel the Contract?

Answer:
 Probably not. After the transaction is closed, the buyer probably does not have the right to cancel the transaction. The buyer would have a claim against the seller for damages, however, for the cost to replace the refrigerator. Note: After the transaction has closed, there is technically no longer a right to cancel the transaction, but only a right to rescind the transaction.

Quick Quiz

Fill in the Blank:
Under lines 310-314 of the AAR Contract a three-dayPeriod Notice is required for the non-compliance of “any provision” of the AAR.

Scenario #3

Although the buyer has qualified for the loan, the buyer’s out-of-state lender still has not funded the loan two weeks after the scheduled closing date. The seller has been patient, but the seller now wants to cancel the Contract. Is the seller required to furnish a three-day Cure Period notice to the buyer?

Answer:
Yes. If one party fails to close the transaction by the scheduled closing date, the other party must deliver a three-day Cure Period notice to the other party, even if the failure to close is more than three days after the scheduled closing date.

Scenario #4

Two weeks before the scheduled closing date, the buyer sends a letter to the seller that the buyer no longer wants to purchase the home because the buyer’s employer will no longer be relocating the buyer to Arizona. The seller wants to cancel the Contract immediately and place the home back on the market. Can the seller cancel the Contract immediately after receiving the buyer’s letter that the buyer no longer wants to purchase the home?

Answer:
No. First, the seller only has the right to cancel the Contract prior to the scheduled closing date if the buyer has committed an anticipatory breach of the Contract. An anticipatory breach is an unequivocal notice, preferably in writing, that a party to a contract will not perform under the contract by the scheduled closing date. Second, assuming that the buyer’s letter to the seller is an anticipatory breach, the Contract requires a three-day Cure Period notice before the seller can cancel the Contract.

Quick Quiz

Fill in the Blank:
Theonly has the right to cancel the Contract prior to the scheduled closing date if the buyer has committed an anticipatory breach of the.

Scenario #5

The seller has not completed the repairs by the scheduled close of escrow date. Although the buyer qualified for the loan, the buyer’s loan has not funded by the scheduled closing escrow date. Both the seller and the buyer on the day after closing deliver three-day Cure Period notices. After the expiration of the three-day Cure Period, the seller still has not completed the repairs, and the buyer’s loan still has not funded. Can either the seller or the buyer cancel the Contract because of a breach of contract?

Answer:
No. A seller or buyer who has received a three-day Cure Period notice because of a “potential” breach of the Contract is still entitled to deliver a three-day Cure Period notice to the other party in “potential” breach in order to place the other party in breach of contract. If the seller or buyer is in breach of the Contract, that person is not entitled to cancel the Contract for breach of contract, or proceed with a claim for damages for breach of the Contract.
Quick Quiz

Fill in the Blank:
If the or buyer is in breach of the Contract, however, that person is not entitled to cancel the Contract forof contract, or proceed with a claim for damages for breach of the.

Scenario #6

The Seller delivers the 3-day cure notice on Tuesday at 12:01 a.m. When does the cure period end?

Answer:
Friday at midnight

Scenario #7

COE is Wednesday the 15th.  On Thursday the 16th the Seller sends the Buyer a 3-day Cure Period notice for failure to close escrow.  The Buyer does not close escrow by Monday the 20th, and the escrow company forfeits the Buyer’s $10,000 earnest money to the Seller.  The Buyer has now started the mediation process to contest the forfeiture of the earnest money, claiming that he has three days to close escrow, permitting him to close escrow by Tuesday the 21st.  Is the Seller or Buyer correct?

Answer:
 
The Seller is correct.  The contract stipulates calendar days not business days which in this case would be Sunday by midnight.  However, if either the Escrow Company or Recorders office are closed for business the close of escrow is automatically allowed to occur the next business day.

Scenario #8

The Seller is very upset that the Buyer has not signed the loan documents on Monday because the COE is Friday.  The Seller calls his agent and state “…I have the moving van arriving, and I need to move?”  If the COE is Friday, when is the last day the Buyer has to sign the loan documents, Monday or Tuesday or Wednesday?

Answer:
 
Read lines 409-410 for explanation of full days.  Note:  If the Seller now sends out a three-day cure notice on Tuesday, the cure for the loan docs will end at 11:59 on Friday.  The buyer would then have until Monday to close escrow.
Quick Quiz

Fill in the Blank:
Thestipulates calendar days not business days which in this case would be Sunday by.

 Scenario #9

COE is Wednesday the 11th.  On Friday the 13th the Seller delivers a 3-day cure for buyer failure to close escrow.  The Buyer does not respond.  Is this sufficient instruction for the escrow company to forfeit the Buyer’s earnest money to the Seller?

Answer:
The Seller must now send the escrow company a notice that the Buyer failed to respond to the cure period notice and make a demand for the earnest money.

Scenario #10

The Seller sends the cure period notice by email.  There was no email address on the contract, but during the course of the escrow, the email address for the Buyer’s Agent and Buyer was provided to the Seller and his agent.  Is this proper notice?

Answer:
Notice must be sent according to the contract (lines 443-448).  If they say they never received it, there is no valid notice. However, if the notice eventually gets received by the non-complying party, this does constitute receipt and notice.
Quick Quiz

Fill in the Blank:
Themust now send the escrow company a notice that the Buyer failed to respond to the cure period notice and make a demand upon the earnest .

Scenario #11

What should the Seller do if the COE date arrives and the Buyer does not close or deliver notice that thy Buyer was unable to obtain loan approval?

Answer:
The Seller should deliver a cure notice specifying that the Buyer has not complied with the contract by either closing escrow or delivering a notice of the inability to obtain loan approval.

Then:

  • If the Buyer closes, there is no breach
  • If the Buyer delivers unfilled loan contingency within three days, there is no breach; assuming there was a good faith effort
  • If the Buyer does neither, the Buyer is in an enforceable breach
    • If the Buyer failed to delver failure notice, the Seller is entitled to the earnest money
    • If the Buyer failed to make a good faith effort, the Seller might accept the earnest money as sole right to damages

Scenario #12

On day 5 of the inspection period, the Buyer submits the BINSR is indicating the “Buyer elects to provide the Seller the opportunity to correct the disapproved items listed below”.  The Buyer lists four items.  The Seller fails to respond within the five-day response period.  Should the Buyer issue “Cure”?

Answer:
The contract outlines the Buyers options.  Buyer can choose to cancel within five days after the expiration of Seller response time OR  Buyer can accept property without repairs.
Quick Quiz

Fill in the Blank:

If thedelivers unfilled loan contingency within 3 days there is no breach; assuming there was a good faith .

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