Who Can Cancel a Contract?
The answer to the question “Who Can Cancel a Contract” isn’t always simple. But, one fact is sure – there is a form for that! That is, when it is the Buyer who is asking to terminate the contract for reasons stated in the body of the TREC promulgated contract.
The well-written TREC 38-4 (TAR 1902) Notice of Buyer’s Termination of Contract form provides for 5 terminations in which the contract enables the Buyer to end the transaction and receive the earnest money. Only the Buyer’s signature is needed as the provisions are contractual. Accompanying the form would be the TAR 1904 Release of Earnest Money form signed by all four parties, buyer(s), seller(s), buyers’ agent/broker and listing agent/broker.
The form also provides a 6th item which is blank but the form states: “Other (identify the paragraph number of contract or the addendum):” which applies to the situation. The intension is to use this form only for those contractual provisions whereby the Buyer solely has the right to terminate. Often, a Buyer might encourage the agent to use this form for reasons other than those stated in the contract. In this situation, the Buyer should seek legal counsel when attempting to end a contract for reasons other than those stated in TREC 38-4 (TAR 1902).
But, what about the Seller? Is there a form for the Seller to cancel a contract?
See the item below from TAR Legal Counsel on this very question. The answer is NO! If the Seller has an interest in terminating a contract, the Seller should contact their legal counsel. There is no form for a seller to conclude a transaction. Most provisions of the TREC promulgated contracts are written to explain the Buyer’s rights to terminate. The Seller actually has few and if exercised, the Seller should review the content of the letter with legal counsel before having the listing agent present it to the Buyers’ agent.
Is there a form a seller can use to terminate a contract?
My client has a contract to sell her home, but the buyer hasn’t deposited the earnest money despite numerous requests from his agent. My client thinks the buyer is in default, and she wants to terminate the contract and receive the earnest money. Is there a form to give notice to the buyer that the contract is terminated?
No. Although TREC contracts have provisions permitting the parties to terminate the contract because of some circumstances or conditions, there are currently only two provisions that allow a party to terminate the contract unilaterally by giving notice:
- When the buyer exercises his unrestricted right to terminate during the option period
- When the buyer cannot obtain financing approval pursuant to the Third Party Financing Condition Addendum
If your seller wants to formally notify the buyer of her election to terminate the contract and receive the earnest money because of the buyer’s default, she can write a letter to that effect that includes an earnest money release for the buyer to sign. While the letter will not conclusively establish that the contract has been terminated, sending the letter is still a good idea because it clearly states the seller’s position that it is terminated.
Read more legal FAQs on texasrealestate.com.