The reason for skipping to page 7 for the first entry in my contract series is that there is this great section buried within that defines a breach. Yes, this is on page 7 of a 9 page contract, oddly enough.
The reason I’m skipping ahead to this section is because it has many uses throughout the purchase contract. There are countless ways it can be used, both by the buyer or the seller, to ‘cure a potential breach’. I’ll be referring back to it as we move through the different sections of the contract so I figured I better cover it up front.
The excerpt below is taken directly from the purchase contract:
Cure Period: A party shall have an opportunity to cure a potential breach of this Contract. If a party fails to comply with any provision of this Contract, the other party shall deliver a notice to the non-complying party specifying the non-compliance. If the non-compliance is not cured within three (3) days after delivery of such notice (“Cure Period”), the failure to comply shall become a breach of Contract.
What the heck does this mean anyway?
It means that a party who fails to carry out their part of the contract can be issued a Cure Period Notice by the non-offending party. The non-complying party must complete the task or carry out the agreed upon terms within 3 days after the notice is made, if they choose not to then the non-offending party may cancel the contract or pursue legal action. To be able to pursue legal action, the non-offending party must have issued a Cure Period Notice and must have waited the specified amount of time to allow the offending party to ‘cure the breach’.
The Cure Period Notice was created to show fairness to all parties when involved in a real estate transaction. There are times where parties fail to act because their real estate agent failed to tell them to perform or even failed to follow up to see if they had performed which resulted in non-compliance. It also helps to enforce the ‘Time is of the Essence’ clause, encouraging everyone to do their part on time, every time. Without the Cure Period, a breach can not be defined. This will also eliminate whether or not a breach has been waived, because an action or inaction is not a breach until the Cure Period Notice has been given.
Once the Cure Period Notice is delivered to the non-complying party, they then have 3 days to comply with the terms. On the fourth day, the non-breaching party may then cancel the contract and receive a refund of their earnest deposit, or continue to move forward with the closing and seek damages through the proper legal channels after closing.
Is this still not making sense? Here is an example of how it can work…
During the inspection period, the buyer discovers that the HVAC unit is not functioning. The buyer issues a Buyer’s Inspection Notice and Seller’s Response form, commonly referred to as a BINSR, to the seller notifying him of the non-working warranted item, the HVAC unit. (According to the Seller Warranties section, the seller warrants that the major systems will continue to function through the close of escrow.) The seller refuses to fix or replace the HVAC unit, the buyer issues a Cure Period Notice and decides to continue with closing. The property closes, the buyer hires an HVAC technician who fixes the unit for $1500, then the buyer takes the seller to small claims court to regain the funds spent on the repair of the non-working warranted item. If the buyer had failed to issue the Cure Period Notice, the breach would not have been defined and he would have had a more difficult time winning his case. **** This is not a guarantee or assurance that all buyers will win in small claims courts in situatiuons like this. Special circumstances apply to each transaction – if the As Is Addendum is used, or the seller warranties paragraph is removed, the seller is not responsible for keeping these items in working order. Consult your real estate agent or attorney for possible implications when the seller warranties section is stricken from a purchase contract. **