Is a Purchase and Sale Agreement Still Valid After the Closing Date Has Passed?
In most cases, the answer is YES! The contract is still valid, but one of the parties is likely in breach of the agreement.
In Georgia, the Purchase and Sale Agreement (PSA) does not automatically expire if the sale does not close on the stated closing date, even if there is a “Time is of the Essence” clause in the contract. To effectively terminate, the non-breaching party must serve a notice of termination on the breaching party. The non-breaching party then has the remedies provided in the law and the PSA. (Note that the GAR PSA Remedies clause limits the remedies.)
When a PSA is not automatically terminated and is still valid, a fully executed amendment to extend the closing date would also be valid. Once the date is extended, the defaulting party is no longer in default.
Automatic Termination is Possible
If the parties wish to provide for automatic termination when a closing date passes, additional contract language would need to be added as a special stipulation.
“ In the event that a closing does not occur on or before the closing date as set forth in this Agreement, including any permitted extensions, then this Agreement shall automatically terminate and the non-defaulting party shall have the right to pursue all available claims at law or in equity against the defaulting party.”
GAR 290 Agreement to Reinstate Contract.
GAR recently added a new form to its arsenal that has created some confusion. GAR 290, Agreement to Reinstate Contract is to be used when the PSA was terminated by one or both of the parties and the parties now want to reinstate the Agreement. Accidental terminations happen. The above situation is a good example. Another example is including an automatic termination clause in an Amendment to Address Concerns. The parties may still be negotiating past the time to respond and, whoops, the automatic termination happens. Or the parties can intend a termination, later change their position and want to reinstate the PSA. In these cases, go to the Agreement to Reinstate Contract.
Leave a Reply.
Real Estate News, Brokers Blog & More