A seller accepts a conditional offer but later receives a higher unconditional offer. The seller wants to accept the second offer and provides the first buyer with a notice to waive conditions within 24 hours. What legal principle governs this situation?

Q: What is the correct answer to: A seller accepts a conditional offer but later receives a higher unconditional offer. The seller wants to accept the second offer and provides the first buyer with a notice to waive conditions within 24 hours. What legal principle governs this situation?

The correct answer is The seller is bound to the first contract and cannot legally accept the second offer. Option B correctly identifies that a binding contract exists once the seller accepts the conditional offer. Under Canadian contract law and provincial real estate legislation like TRESA, acceptance creates immediate contractual obligations between parties. The seller cannot legally accept a second offer for the same property as this would constitute breach of contract. The existence of conditions doesn't prevent contract formation - it only affects completion obligations. The seller's ultimatum to waive conditions doesn't void the existing contract or provide legal grounds to accept competing offers.

Q: What background knowledge is needed for this Contracts & Agreements question?

Contract formation in real estate requires offer, acceptance, consideration, and intention to create legal relations. Under Canadian law, acceptance of an offer creates an immediately binding contract, even with conditions precedent. Conditions don't prevent contract formation but affect completion obligations. Provincial legislation like TRESA (Ontario), RESA (Alberta), and BCFSA regulations govern real estate contracts. Once bound, sellers cannot accept competing offers without breaching their contractual duties. The doctrine of privity means only parties to the contract have rights and obligations under it.

Q: What is a good way to remember the answer to this Contracts & Agreements question?

ACCEPT: Acceptance Creates Contract Even with Pending Terms. Think of acceptance as a lock - once the seller turns the key (accepts), the door is locked to other buyers, even if some rooms (conditions) still need to be inspected. When you see questions about conditional offers and competing bids, remember ACCEPT. If there's been acceptance, there's a binding contract regardless of conditions. The seller is 'locked in' and cannot accept other offers.

Q: What exam tip applies to this Contracts & Agreements question?

Look for the word 'accepts' in the question. Once a seller accepts any offer (conditional or not), they're contractually bound. Competing offers after acceptance always result in potential breach of contract.

Q: How does this Contracts & Agreements concept apply in real world practice?

A seller accepts a conditional offer subject to financing on Monday. On Wednesday, they receive a higher unconditional offer and want to accept it. The seller's agent must explain they cannot legally do so as they're bound to the first buyer. The seller can only hope the first buyer's conditions aren't satisfied, allowing the contract to terminate naturally. Attempting to accept the second offer would expose the seller to legal action for breach of contract and potential damages.

Question

Contracts & AgreementsContract Law FundamentalsHARD

A seller accepts a conditional offer but later receives a higher unconditional offer. The seller wants to accept the second offer and provides the first buyer with a notice to waive conditions within 24 hours. What legal principle governs this situation?

Answer Options

A

The seller can freely choose the higher offer as no binding contract exists

B

The seller is bound to the first contract and cannot legally accept the second offer

C

The seller must allow both buyers to enter a bidding war

D

The seller can only accept the second offer if the first buyer agrees