A Colorado buyer's broker prepared a custom addendum to the CREC Contract to Buy and Sell Real Estate that modified the default remedies clause to limit the seller's recovery to earnest money only, regardless of actual damages. The buyer signed it, and the seller accepted it without consulting an attorney. After the buyer defaulted, the seller's actual damages were $40,000 but the earnest money was only $8,000. Can the seller recover the full $40,000?
Correct Answer
D) Yes, because the broker-drafted addendum constitutes unauthorized practice of law and is unenforceable, restoring the seller's full damages rights
Under Colorado law, only a licensed attorney may draft contract language that modifies the legal rights of parties in a real estate transaction. A broker who drafts a custom addendum modifying the default remedies clause is engaging in the unauthorized practice of law. Such a broker-drafted addendum that alters substantive legal rights may be found unenforceable, potentially restoring the seller's right to pursue full actual damages. This is a critical Colorado-specific rule: CREC-approved forms must be used, and custom legal language requires attorney drafting.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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