What the final episode of this series depicts: The seller’s failure to timely deliver documents excuses the buyer’s concurrent obligation to fund escrow, as the implied covenant of good faith requires the seller to perform early enough to allow the buyer and lender to meet the closing deadline.
In this series, we break down the critical steps every buyer agent must take to protect their buyer. From enforcing specific performance to calculating recoverable money losses, you’ll see how to navigate a seller’s breach with confidence and precision.
The prior episode illustrates general damages, special damages and prejudgment interest.
Mutually exclusive conditions concurrent
The escrow process depends on the orderly receipt of documents to close an escrowed transaction, a procedure a buyer and seller are required to honor. As a matter of commercial reality, escrow calls for closing funds from either the buyer or the lender only when escrow is able to close. In turn, neither the buyer nor the lender deposit or wire funds until they receive a call from escrow for funds.
Since escrow is not ready to call for funds due to the seller’s untimely delivery to escrow of necessary documents only the seller possessed, the buyer’s delivery of funds by the date scheduled for closing is excused. [Ninety Nine Investments, Ltd. v. Overseas Courier Service (Singapore) Private, Ltd. (2003) 113 CA4th 1118]
The seller’s obligation to deliver documents and the buyer’s obligation to fund escrow are considered mutually exclusive conditions concurrent. As such, the buyer and the seller each independently and separately perform by the date scheduled for closing. However, management of a closing by escrow requires their receipt of all documents needed to close before they call for funds.
When all the buyer’s and seller’s documents are delivered and held by escrow, and escrow calls for funding, lenders generally need five to seven days to prepare, forward and receive signed mortgage documents before they will fund.
Purchase agreements do not call for the buyer or seller to deliver documents to escrow prior to the date set for closing. However, an implied covenant of good faith and fair dealing exists in all real estate agreements.
The implied covenant imposes a duty on the seller to timely perform by taking action to avoid frustrating the buyer’s right to receive the benefits of the agreement.
For example, the seller must perform early enough to allow time for the buyer and their lender to fund escrow when the seller intends to treat the date scheduled for closing as an absolute deadline.
