s. 4 - Deposits
Here, we start our review of s. 4 of the Purchase Contract. Most clauses are self-explanatory so we will add our commentary only where needed:
4.1 The seller and buyer agree that clauses 4.2 through 4.8 are the terms of trust for the deposits.
We believe this subsection is for clarification purposes only. Otherwise, it would be implied and unnecessary.
4.2 The seller and buyer appoint ________________ as trustee for the deposit money.
The deposits are usually paid to the seller’s realtor’s brokerage (i.e. listing brokerage) where the seller has a realtor. If the transaction is private (i.e. there are no realtors involved), we recommend paying the deposits into the seller’s lawyer’s trust account (this is the preferred method by most lenders as well when approving the mortgage for buyer).
4.3 The buyer will pay a deposit of $________________, which will form part of the Purchase Price, to the trustee by __________________, on or before _______________________________.
First blank -> here goes the numerical value for the deposit. In order to avoid ambiguity re the deposit amount, we recommend writing the deposit amount using words as well. A badly written $17,000 could be interpreted as $11,000 too sometimes. However, the words “Seventeen thousand dollars” are a lot less ambiguous.
Second blank -> the method of payment gets inserted here. Most often in practice, “Certified Cheque or Bank Draft” are used.
Third blank -> the deadline for payment of the deposit goes here.
4.4 The buyer will pay an additional deposit of $___________________, which will form part of the Purchase Price, to the trustee by ______________________, on or before _______________________.
Similar to 4.3 except that this is for “additional deposit”. Optional section.
4.5 If the buyer fails to pay a deposit by the agreed date, the seller may void this contract at the seller’s option by giving the buyer written notice. The seller’s option expires when the seller accepts a deposit, even if late.
This section puts the responsibility of cancelling the deal if no deposit has been paid on seller’s shoulders. Furthermore, the seller has to provide the buyer a “written notice.” Otherwise, if the seller has not provided a written notice and he accepts payment of a late deposit, the option to void the contract is no longer available to the seller.
This is a very crucial section from the perspective of seller’s realtor as well. If without seeking advice and authorization from the seller, the seller’s realtor accepts a late deposit, is the seller bound by the decision? We believe the answer is no as the realtor, acting as an agent, has acted outside the scope of his/her agency. However, the realtor could potentially be facing liability.