Ralph's Weekly Legal What-If Scenarios: Contract Addendums - Who Signs What And Why?
Each Monday, I'm going to post a "What If" Scenario that presents a legal issue in a real estate hypothetical situation.
Each Sunday, either the correct legal answer (or most likely legal resolution) to the situation will be posted.
These are great opportunities to keep your real estate legal chops honed and tuned as a real estate professional. And I'm sure there will be some interesting discussions going on related to these hypothetical situations. Some of you may also have had identical situations in the past that will bring some interesting light to the answers.
Here is this week's scenario:
Jane is the listing agent, and is representing her seller, Adam, in an escrow. Steve is the buyer's agent, and he is representing his buyer Carol.
Things are going fairly well with the escrow, and the loan approval took a little longer than expected, thus creating the need to close escrow a few days later than what the contract states. Carol is using her brother-in-law Derek as the loan broker to obtain the loan.
An addendum is drawn up to extend the closing date out 5 more days than the original contract states. The addendum is drawn up using ZipForms C.A.R. form ADM (see sample below), and the principles and agents sign the form in the designated signature lines on the addendum.
About a year later, Carol, during her plans to add on a new wing to the home, discovers via her contractor that there was an old underground septic tank that was never disclosed to her by the seller. The seller was aware of the septic tank, but did not disclose it, not even to Jane his listing agent.
It will cost Carol approximately $20,000 to excavate the septic tank and fill in the soil properly for the type of renovations she is making.
Carol is considering litigation to recover the damages she must pay to remediate the old septic tank.
If Carol decides to file a lawsuit, will anyone be be responsible for the damages? And if so, why?
(Hint: The answer may surprise you.....)
Post your definition of what the answer is, and the correct answer along with the relative laws that apply will be posted on Sunday.