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Professional Standards Manual

Trading Services

4. General Information

(a) Contract Clauses - View Entire Section

(XVI) "Subject to" Clauses — General Information - View Subsection
(15) The Practice of Adding New Terms on a Subject Removal Addendum

[04/10/2010 The following information added to Professional Standards Manual]

There appears to be a growing practice in the industry whereby some licensees are using the Subject Removal Addendum to a Contract of Purchase and Sale to add an amendment to the contract (e.g. a price reduction) after the removal of the subject clauses and then having the buyers sign at the bottom of the Subject Removal Addendum.

This imposes a risk on the buyer as, once all of the subject clauses have been removed, the seller may not agree to the amendment and may take the position that the buyer has removed all subject clauses, and therefore there is a firm and binding Contract of Purchase and Sale.

An amendment constitutes a contract to change an existing contract. Since the amendment itself amounts to a contract, there must be fresh consideration or a seal in support of it. An amendment made without new consideration or a seal is unenforceable because it is a gratuitous promise.

A licensee seeking an amendment to a Contract of Purchase and Sale on behalf of the buyer must first confirm with the other parties that any discussions about the proposed change will not terminate the existing contract. During the ensuing discussion over the proposed amendment, the licensee must emphasize to all parties that the original Contract of Purchase and Sale remains binding on them until any amendment is finalized. The licensee should prepare the amendment on a separate form. This should be done and signed by the parties to the Contract of Purchase and Sale prior to the removal of the subject clauses, which are then removed on a separate addendum. If, at the time the amendment is to be signed, the time for the removal of the subject clauses is in danger of expiring, then a further amendment to the contract may be included on the same form extending the time for subject removal. An example of a Contract of Purchase and Sale Amendment form is included below.

For those licensees who use the BCREA preprinted Contract of Purchase and Sale Addendum form to make amendments to the Contract of Purchase and Sale, they should ensure that it contains the following clause:

“All other terms and conditions in the said Contract of Purchase and Sale remain the same and in full force and effect. Time shall remain of the essence.”

Licensees must alert their clients that there are risks to consider when amending the terms of an already accepted contract on a Subject Removal Addendum form. Both the buyer and seller should be advised to get independent legal advice so that they may understand their options in this regard.

Contract of Purchase and Sale Amendment

DATE ____________________

RE: Address _________________________________________________

Legal __________________________________________________

Further to the Contract of Purchase and Sale dated _____________________

Made between _______________________________________as Seller, and

___________________________________________________ as Buyer and

Covering the above mentioned property, the undersigned hereby agree as follows:

_______________________________________________________________

All other terms and conditions in the said Contract of Purchase and Sale remain the same and in full force and effect. Time shall remain of the essence.

___________________________ _________________________________ Seal

Witness Buyer

_________________________ _________________________________Seal

Witness Seller