“To Be Determined” Can Make a Contract Unenforceable

We often see contracts using the acronym TBD or “To Be Determined.” TBD may work for some situations, but it definitely does not work in a contract.  The reason is simple, to create an enforceable contract in Georgia, there must be a present agreement of the parties on all material terms.  

Financing Contingency
If you write TBD on a material term, such as an interest rate in a financing contingency, then the parties have merely agreed to agree in the future and the contract would be unenforceable in Georgia. The parties have not presently agreed to all relevant terms. What does work in the financing contingency example for interest rate is “prevailing rate” or “market rate.”  The “prevailing rate” and “market rate” can be determined, so there is an enforceable agreement.

Closing Attorney
The same legal reasoning applies to the choice of a closing attorney.  If the closing attorney is TBD, it simply means the parties have agreed to agree. That doesn’t work.  Instead, the language “TBD by the buyer (or seller)” works. Only one of the parties needs to decide who the closing attorney will be.  “TBD by the Buyer (or Seller)” is enforceable.

Closing Date
A closing date should never be TBD by itself, but it can be tied to an event or date that can be determined.  For example, if a buyer needs to get a permit or needs to rezone a property, the closing date can be tied to the date that the permit is received or the rezoning is completed.  For example, this works: “Closing date shall be 30 days from the date of issuance of the permit to build.”

If there are material terms in a contract that remain, it is always best to try to work them out before finalizing the contract. Otherwise, see above!

Broker Corner 8/30/23