A seller receives two offers on the same day: Offer A for $500,000 with no conditions, and Offer B for $520,000 with a financing condition. The seller signs and returns Offer A. What happens to Offer B?
Correct Answer
B) Offer B becomes automatically void when Offer A is accepted
Once a seller accepts one offer, any other outstanding offers on the same property become automatically void because the seller can no longer legally accept them. The property is now under contract with the accepted buyer, making it impossible to fulfill obligations to other potential buyers.
Why This Is the Correct Answer
Option B is correct because acceptance of an offer creates a binding contract, making it legally impossible for the seller to accept any other offers on the same property. Under Canadian contract law principles applied in real estate, when Offer A was accepted, the seller's legal capacity to accept Offer B was automatically extinguished. The property is now under contract, and accepting another offer would constitute breach of contract and potentially fraudulent misrepresentation. This automatic voiding protects all parties and prevents multiple competing contracts on the same property.
Why the Other Options Are Wrong
Option A: Offer B remains valid until its expiry time
Offer B cannot remain valid after Offer A is accepted because the seller no longer has the legal capacity to fulfill Offer B. The subject matter of the contract (the property) is no longer available for sale to other buyers, making continued validity of Offer B legally impossible and meaningless.
Option C: The seller must formally reject Offer B in writing
While formal rejection is good practice for clear communication, it is not legally required. The acceptance of Offer A automatically voids Offer B by operation of law, regardless of whether the seller sends written notice. The legal effect occurs immediately upon acceptance of the first offer.
Option D: Offer B takes priority due to the higher purchase price
Purchase price is irrelevant to the legal principle. Contract law operates on a 'first accepted' basis, not a 'highest price' basis. Once the seller accepts any offer, they are bound by that agreement regardless of whether other offers might be more financially attractive.
Deep Analysis of This Contracts & Agreements Question
This question tests understanding of the fundamental principle that a property can only be subject to one binding contract at a time. When a seller accepts an offer, they enter into a legally binding agreement to sell that specific property to that buyer. This creates an immediate legal impossibility for the seller to accept any other offers on the same property, as they cannot sell the same property to multiple buyers simultaneously. The automatic voiding of other offers protects all parties from potential legal complications and ensures clarity in real estate transactions. This principle is rooted in basic contract law and property law, where acceptance of an offer creates a binding contract. The timing and conditions of competing offers are irrelevant once acceptance occurs - the legal capacity to accept other offers is extinguished.
Background Knowledge for Contracts & Agreements
Real estate offers are governed by contract law principles where acceptance creates binding agreements. In Canada, under provincial real estate legislation like TRESA (Ontario) and RESA (Alberta), once an offer is accepted, a binding contract exists. The seller cannot accept multiple offers on the same property as this would create competing legal obligations they cannot fulfill. This principle prevents double-selling and protects buyers' legitimate expectations. The automatic voiding of unaccepted offers upon acceptance of another offer is a fundamental protection mechanism in real estate transactions, ensuring legal certainty and preventing fraudulent practices.
Memory Technique
The 'One Property, One Contract' RuleThink of a property like a single seat on an airplane - once someone sits down (accepts an offer), that seat is taken and no one else can sit there. All other 'boarding passes' (offers) for that seat become automatically invalid, even if they were for first-class (higher price).
When you see questions about multiple offers, immediately think 'airplane seat' - only one person can occupy it at a time. Once acceptance happens, all other offers are automatically 'bumped' from the flight, regardless of their terms or price.
Exam Tip for Contracts & Agreements
Look for the word 'accepts' in the question. Once you see acceptance of any offer, immediately eliminate options suggesting other offers remain valid or require formal rejection. Focus on the automatic legal effect of acceptance.
Real World Application in Contracts & Agreements
A listing agent receives multiple offers on a hot property during a bidding war. After the seller accepts one offer, the agent must immediately contact all other buyers to inform them their offers are no longer valid. This prevents confusion and potential legal disputes. The agent cannot hold other offers 'in reserve' or suggest the seller can still consider them, as doing so would misrepresent the legal situation and potentially expose all parties to liability for breach of contract or misrepresentation.
Common Mistakes to Avoid on Contracts & Agreements Questions
- •Thinking higher-priced offers take priority over accepted lower offers
- •Believing offers remain valid until their expiry time regardless of other acceptances
- •Assuming formal written rejection is required to void unaccepted offers
Key Terms
More Contracts & Agreements Questions
What is the primary purpose of an Agreement of Purchase and Sale (APS) in a real estate transaction?
In a listing agreement, what does the term 'holdover period' refer to?
Which of the following is NOT typically considered an essential element for a valid contract under Canadian common law?
When can a conditional offer become unconditional in a real estate transaction?
A buyer submits an offer with a financing condition that expires at 11:59 PM on Friday. The buyer's mortgage application is approved at 10:30 AM on Saturday. What is the legal status of the offer?
- → In Ontario, what is the significance of the 'irrevocable' period in an Agreement of Purchase and Sale?
- → A seller receives two offers on the same property. The first offer is conditional on financing, and the second is unconditional but for a lower price. What is the seller's best legal option?
- → What happens when a buyer waives a home inspection condition after discovering significant structural issues during the inspection?
- → In British Columbia, if a listing agent presents an offer to their seller client that contains an unusual clause they don't understand, what is their professional obligation?
- → A buyer's agent discovers that their client has been declared bankrupt but has not disclosed this information. The client wants to submit an offer on a property. What should the agent do?
- → What is the primary purpose of an Agreement of Purchase and Sale in a real estate transaction?
- → In a listing agreement, what does the term 'holdover period' refer to?
- → Which of the following is NOT typically considered an essential element for a valid contract under Canadian common law?
- → What happens when a condition in an Agreement of Purchase and Sale is not fulfilled by the specified deadline?
- → A buyer submits an offer with a financing condition that must be satisfied within 5 business days. On day 4, the buyer's mortgage application is approved but they want better terms. What can the buyer legally do?
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A seller receives two offers on the same day: Offer A for $500,000 with no conditions, and Offer B for $520,000 with a financing condition. The seller signs Offer A. What is the legal status of Offer B?