Blog by Andrew Peck

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"What do the terms 'nominee' and '72 hour clock' really mean?"

"What do the terms 'nominee' and '72 hour clock' mean?"

"Here are two questions about a contract on my listed property. The contract (from other brokerage as buyer’s agent) stated the name of buyer as "John Smith & or Nominee". There is no further definition about "nominee" elsewhere in the contract. Name of buyer is fake.

Question 1: Is this contract voidable as it is uncertain about the party of buyer ("and or nominee")? There is a 72-hour time clause in the contract which states:

"However, the Seller may, upon receipt of another acceptable offer after Feb 22/06, by delivering a written notice to the Buyer or the buyer's agent requiring the Buyer to remove all conditions from the contract within 72 hours of the delivery of the notice, not to include Sundays and Statutory Holidays. If the Buyer fails to remove all the conditions before the expiry of the notice period, the contract will terminate."

Question 2: Feb 22/06 is a Wednesday. A notice invoking the time clause was served prior to Feb 22/06 but the buyer agent says the 72-hour period starts only at 12:01AM on Feb 23 (Thursday) and ends at 12:01AM on Feb 27 (Monday). My question is: should the counting start from 00:00:00AM on Feb 23 (Thursday) and end at 11:59:59 PM on Feb 25 (Saturday), or end at the END of Feb 25 (so that the full 72 hours period has run)?"

My answer to question 1 is twofold. First, if it is known that the buyer who is signing the contract is a fake, then the realtor who drafted this contract should be reported to the Real Estate Council. Second, the question about using ‘or nominee’ has been covered by Legally Speaking Column 65 back in February 1985 (http://portal.realtorlink.ca/).

The reason we avoid using the term “or nominee” next to the buyer’s name is that the courts will sometimes rule that the contract is voidable for uncertainty. There is a general rule of thumb in determining the decision:

  • If the parties had intended that the buyer’s right to nominate another party did not relieve the buyer of his or her obligation to complete the transaction in the event that the nominee did not complete, then the courts will rule that the contract is not uncertain and the buyer is responsible for the consequence of failing to complete. 
  • If however, the evidence establishes that the buyer never intended to be bound personally to the seller but instead intended that the deal was truly going to be between the nominee and the seller, then the contract would likely be void for uncertainty.  he court can not enforce a contract that is unclear as to who the buyer really was intended.

The problem is showing evidence that the buyer intended to be bound in any event. In order to avoid this confusion you should insert the following clause into the contract:

“The buyer agrees to remain liable to the seller under this contract notwithstanding that the buyer may nominate a third party to complete this transaction.”

The Real Estate Council advises Realtors to refrain from using “or nominee” in the buyer line of the contract. If you are the listing agent of a property and receive an offer with ‘or nominee” next to the buyer’s name, you should cross this out and have the seller initial the change and ask the buyer’s agent to clarify this with their buyer.  If the buyer intends to nominate another party, ask for those details to be spelled out in the contract. 

To answer the second question it seems to be asking, “When does the 72 hours start clicking?” It is important to remember that the 72 hours are just that, hours and not three calendar days. So a notice usually starts at the moment that it is deemed delivered (either in person or by electronic means (fax, etc.). Generally we don’t restrict a 72 hour clause to only being given after a certain date, but in this case the notice would start at the stroke of midnight and would end 72 hours later at the stroke of midnight. This question is asking if one second of time on Sunday morning would make all of Sunday a free day for the buyer. I don’t believe that would be seen as the intention of the parties and the contract would come to an end on Saturday night at midnight. In order to avoid this misunderstanding, you should use the form provided in the Licensee Practice Manual page 82 which outlines the time the notice period starts and ends in plain language. In the event of a dispute between the buyer and the seller, the realtor would advise the parties to seek legal advice. Further, if the Realtor were uncertain of the timing, then they should provide extra time on any subsequent back up offers for the seller’s subject removal to make sure such disputes do not occur. 

Finally, on this topic, it is necessary for the listing agent to provide proof of the delivery of the notice to the buyer or their agent. I caution you if you are using a home fax machine to send the notice – make sure your home fax machine has the correct date and time on it, otherwise you could be creating a problem for the seller.  You should always follow up delivery of notice (electronically) by a phone call to the other agent. If you are delivering the notice to the buyer agency office, you should ask for the name of the receptionist who receives the document and make a note of it in your file.

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