Have you ever taught a person how to drive? At first, everything seems impossible to the new driver. Merging onto the highway? Terrifying! Parallel parking? Forget about it! Not to mention the additional fun of that first winter and learning how to drive in snow and on ice. But soon, that new driver gains some confidence and things get a lot easier. Eventually you even stop using your imaginary break pedal on the passenger side and enjoy the ride. This process is a lot like drafting a real estate contract. At first, the new licensee pores over each provision, afraid of making a mistake. But just like driving, it eventually becomes second nature. The problem with something becoming second nature, though, is sometimes we get lazy and are not as careful as we should be. I am sure you will agree that there are some drivers out there who should probably revisit driver’s education. The same is true with contracts — sometimes it is a good idea to take a step back and review the basics of contract drafting.  

Agency

Do not make a mistake right off the bat. Be sure to complete lines 1-2 of the WB-11 Residential Offer to Purchase and declare your agency situation. 

LICENSEE DRAFTING THIS OFFER ON __________[DATE] IS (AGENT OF BUYER) (AGENT OF SELLER/LISTING FIRM) (AGENT OF BUYER AND SELLER) STRIKE THOSE NOT APPLICABLE.

Please note that there is no optional check box before this section of the offer, and that means it is a mandatory provision that must be completed.

• You are the listing agent drafting an offer for a buyer-customer. Strike “Agent of Buyer” and “Agent of Buyer and Seller.”
• You are a subagent drafting an offer for a buyer-customer on another firm’s listing. Strike “Agent of Buyer” and “Agent of Buyer and Seller."
• You are a buyer’s agent drafting an offer for your buyer-client on a property listed with another firm. Strike “Agent of Seller/Listing Firm” and “Agent of Buyer and Seller.” 
• You are a buyer’s agent drafting an offer for a buyer-client and your firm also has the listing and both the seller and buyer agreed to multiple representation with designated agency. Strike “Agent of Seller/Listing Firm” and “Agent of Buyer and Seller.”
• You are a buyer’s agent drafting an offer for a buyer-client and your firm also has the listing, and both the buyer and seller agreed to multiple representation without designated agency. Strike “Agent of Buyer” and “Agent of Seller/Listing Firm.” 

What do you do if you are the listing agent and you receive an offer from another agent that does not have the agency section completed correctly? You still must present the offer to the seller and explain to the seller that you can prepare a counter-offer to address the agency oversight and any other terms the seller wants to counter. The seller can, however, accept the offer as-is if the seller chooses to do so. If the transaction does not go well, however, either the seller or the buyer (or the other agent) could make a complaint to the Department of Safety and Professional Services (DSPS). The concern with all drafting errors, including failure to identify the agency role of the drafter, is that they represent incompetent practice for which a licensee can be disciplined. 

Dates and deadlines

Imagine if you got the opportunity to draft your own contract with your cell phone provider or credit card company. Would you just take their “default” terms and rely on whatever they put forth initially? No way! If you had the chance, you would try to negotiate the terms most favorable for you, including when your payment is due, how many days late you could pay without consequence, and even your interest rate if the contract called for interest. Sure, many of our real estate contracts contain default dates and deadlines, but those “boilerplate” terms may not really be what is best for your party. 

Best practice is to complete all dates and deadlines according to the instruction of the party. Relying on default deadlines and not writing in the specific deadline requested by the party invites the interpretation that the party did not review that section, thus challenging whether there is a meeting of the minds between the parties, which is essential for an enforceable contract.

One may think of the default dates and deadlines in an offer to purchase like an airbag in a car. It will hopefully protect the occupants of the car if a mistake is made, but better to not make the mistake and not need the protection. Including default deadlines in an offer is done to potentially preserve a contract where a deadline was missed in error; it is not intended to be a substitute for discussing the provision with a party and indicating the deadline requested by that party. 

Blank lines

Let’s talk about best practice when completing a form that has blank lines. For example, in the Closing Prorations section of the WB-11 Residential Offer to Purchase, there is a blank line at line 361 for parties to include additional items for proration. If there are no additional items to be prorated, should a licensee put “n/a” or “none” to clarify there are no additional items for proration? 

Ideally, a licensee would put “n/a” or “none” on blank lines in an offer that do not apply to that particular transaction. For example, if the parties did not have additional items to prorate, the licensee would put “n/a” or “none” on that blank line. Doing so establishes that the party considered that provision and acknowledges that it does not apply to this transaction. This helps to establish that there is a meeting of the minds between the parties, which is a necessary component to create an enforceable contract. Leaving blank lines blank and not indicating “n/a” or “none” invites the potential interpretation that the provision was missed in error and that there may not be a meeting of the minds. 

If parties to a contract were to end up in a dispute involving a lawsuit, marking blank lines as “n/a” or “none” would likely be seen as stronger evidence of the parties’ contractual intentions and help to establish there was a meeting of the minds. A judge may interpret blank lines as an oversight by the drafter and not the true intention of the parties to the contract. 

Competent licensees should completely fill out approved forms under REEB policy.

Optional provisions

Not every party wants or needs the same terms in their contract. Financing may be the way for some buyers, but others may be cash buyers. Some buyers would never consider drafting an offer without an inspection contingency, where others are more willing to tolerate the risk involved with that strategy. 

What is the effect if a licensee inserts a deadline in a contingency but does not check the optional provision box that precedes the contingency? Based on the plain language of the WB-11 Residential Offer to Purchase at lines 451-452, “Terms of this Offer that are preceded by an OPEN BOX [ ] are part of this Offer ONLY if the box is marked such as with an “X”. They are not part of this offer if marked “N/A” or are left blank.”

If the box is not checked, the contingency is not included per the terms of the offer. If the parties were to end up in a dispute, however, courts interpreting a contract dispute will often try to discern the intent of the parties to a contract, and including a deadline but not checking the box may be considered evidence that the party was attempting to include that contingency. Regardless of whether or not a court decides that including a deadline in a contingency but not checking the box to include it means it is included in the offer, it is going to be a problem for the licensee who drafted the offer and made the mistake that created the dispute to begin with.

Licensees should be aware, however, of some local addenda that include a provision that modifies the plain language interpretation of the offer as it relates to optional provisions. An addendum might include a statement such as “For optional provisions in the Offer (and any addenda) which require a box to be checked which have not been marked ‘n/a’ or stricken in their entirety, if any blank within any part of the optional provision has been filled in (by handwriting or by typing), then it shall be as if the appropriate box was also checked thus including said optional provision within the Offer.” 

Because there are addenda used in practice that contain an identical or similar provision incorporating a contingency despite the box not being checked, licensees should use caution when dealing with unfamiliar or recently revised addenda. 

Ambiguous provisions

Does anyone really like ambiguity? Does anyone want to hear from their doctor that the results of a test are “inconclusive?” Or what if you order a sweater described as “blue,” but there is no picture or further description? Will the sweater be navy, sky, cornflower or some other kind of blue? In the world of contracts, ambiguous terms are like throwing open the courtroom door and telling the judge, “We will be right there. As soon as the parties disagree about interpretation of this term.” 

Obviously, best practice is to avoid ambiguous terms. Drafting contract language is the time to shine for those who are precise, meticulous and detail oriented. Not only does drafting with ambiguity set the stage for a future conflict if the parties do end up in a dispute, but a court will construe ambiguous contract terms against the drafter. If a licensee drafts an offer for a buyer and asks the seller to “paint the first-floor bedroom blue,” any color of blue that the seller picks is going to be considered sufficient under the terms of the contract. Even if the seller picks the darkest of navy and paints not only the walls but also the ceiling and the wood floor in what was supposed to be a baby’s nursery, if the paint is blue, then the seller complied with the terms of the contract. Let’s not get started on what would happen if the offer included a provision asking the seller to “paint the first-floor bedroom blue” and there was more than one bedroom on the first floor.

What do you do, though, if you are the listing agent and receive an offer drafted by a licensee for a buyer who asks the seller to “paint the first-floor bedroom blue,” and there are multiple bedrooms on the first floor? Suppose the seller loves navy blue and thinks painting the entire room — including the ceiling and floor — sounds like a terrific idea. Even though the offer is drafted poorly and contains ambiguous terms, you still must present it to your seller and the seller can, as with any offer, accept it, reject it, counter it or let it expire. To avoid problems down the road, you could offer to draft a counter-offer for your seller to clarify what the agent meant with the provision asking the seller to “paint the first-floor bedroom blue.” If your seller decides to accept the poorly drafted offer, you should prepare the seller for potential disputes going forward.

No matter how many years a person has been practicing or how many transactions they have completed, it can be useful for everyone to take a break and review the basics of contract drafting. There is a reason there are so many traffic accidents during the first big snowfall of the year — our winter driving skills are rusty and need a little refresher. Do not let your contract drafting get rusty or become second nature in a way that has negative repercussions, such as incorrectly filling out provisions or skipping them altogether. If you read this whole article and said, “Yep, I do all of these things and then some,” then keep up the good work and continue to be the example of a careful, competent real estate licensee.

Jennifer Lindsley is Staff Attorney and Director of Training for the WRA.