Which contractual obligations survive closing?
QUESTION: I have a question about paragraph 18 of Standard Form 2-T. Titled “Survival,” it states that if any provision of the contract is required to be “observed, kept or performed” after Closing, it shall survive Closing and remain binding on the parties until fully performed. That provision seems inconsistent with paragraph 4(h) of the contract which states that “closing shall constitute acceptance of the property in its then existing condition, unless provision is otherwise made in writing.” When does paragraph 18 apply and what are some examples of obligations that survive closing?
ANSWER: Paragraph 18 does not negate the limitation on buyers imposed by paragraph 4(h). The fact is that virtually all obligations imposed on the parties by Standard Form 2-T may be performed prior to Closing. Those obligations do NOT survive Closing, unless the parties agree otherwise.
A common example of such an agreement is where the seller agrees to complete repairs to the property but is unable to complete those repairs prior to Closing. In that circ*mstance, the parties do have the option of reaching an agreement for the seller to complete specified repairs after Closing. If the parties agree to such an arrangement, it is crucial that their agreement be set forth in a written instrument prepared by an attorney that recites the consideration necessary to make the agreement legally enforceable. By virtue of paragraph 18, the obligation imposed on the seller by such an agreement would survive Closing.
There are other examples of obligations that survive Closing. In some cases, the parties agree that the seller may remain in possession after Closing and attach Standard Form 2A8-T as an addendum to their contract. That form imposes various obligations on the seller that relate to the period after Closing such as the obligation to maintain the property and repair appliances. That form also obligates the seller to vacate the property no later than the end of the term specified. These obligations survive Closing by virtue of the language of paragraph 18.
Another example is the situation where the property is damaged after the parties are under contract, and the buyer elects to proceed with Closing even though the property has not been fully repaired. Paragraph 11 of Form 2-T states that, in that circ*mstance, the buyer is entitled to receive, in addition to the property, the proceeds of any insurance claim filed by the seller. If those proceeds are received after Closing, the seller’s obligation to deliver them to the Buyer would survive Closing by virtue of paragraph 18.
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FAQs
Titled “Survival,” it states that if any provision of the contract is required to be “observed, kept or performed” after Closing, it shall survive Closing and remain binding on the parties until fully performed.
Does a real estate contract survive closing? ›
This means that unless the purchase and sale agreement explicitly states provisions that survive the closing, they cease to have legal effect. In paragraph C40, titled “Survival of Agreement,” the contract identifies specific elements that survive the closing: Obligation to pay real estate commission. Warranty of title.
What does "survive the closing" mean? ›
At this point, all the promises and conditions typically end (or “merge”), unless stated otherwise in the purchase agreement. However, some promises are designed to continue even after the deal closes. These promises “survive” and don't “merge” at closing, hence the term.
Can a buyer cancel a real estate contract in North Carolina? ›
Per the North Carolina Real Estate Commission, buyers can pull out of the contract within a set number of days without penalty under set circ*mstances. For instance, if material defects are initially concealed but are subsequently uncovered during an inspection, the buyer may be able to withdraw from the transaction.
What obligations survive termination of a contract? ›
Two accrued obligations that are most commonly recognised by the courts as surviving termination are: The obligation to pay money due under a contract; and. The obligation to pay compensation/damages.
What are surviving provisions? ›
The terms which by their nature are intended to survive termination or expiration of the Agreement shall survive any such termination and expiration.
What is the general survivability clause? ›
A Standard Clause that specifies for what purpose and for how long after the closing of a commercial transaction the parties may rely on representations and warranties in the commercial agreement, including legal action.
What is the survival clause in a settlement agreement? ›
A survival clause expressly identifies certain obligations, rights, warranties or clauses that will continue after a contract comes to an end. The term 'survival' refers to the enforceability of certain rights and obligations after termination.
What is the survival period clause? ›
Definition: Generally survival period comes under health insurance and life insurance policies that cover particular critical illnesses. This is the time period that the insured must live after getting diagnosed with a critical illness for a successful claim.
What is the 3 day rule in NC? ›
- Whenever a party has the right to do some act or take some proceedings within a prescribed period after the service of a notice or other paper upon him and the notice or paper is served upon him by mail, three days shall be added to the prescribed period.
“Although this will cause some pushback and sometimes isn't looked at as the most ethical, a seller can legally still accept any other offer up until attorney review conclude as the deal isn't officially under contract.” For the most part, though, buyers more commonly back out of contracts rather than sellers.
Can a buyer back out after due diligence in NC? ›
If concerning issues are revealed through due diligence, such as defects uncovered in an inspection report, the buyer retains the ability to terminate the contract before expiration of the timeframe and receive their earnest money deposit back.
What is an example of a survival of terms clause? ›
The terms and conditions of this Agreement which by their nature extend beyond termination of this Agreement shall survive the expiration or termination of this Agreement to the full extent necessary for their enforcement and for the protection of the party in whose favor they operate.
Do you need a survival clause in a contract? ›
Survival clauses are critical when business owners disclose their intellectual property. Business owners can add a survival clause to their contract when they want specific warranties or liabilities to persist.
What is the purpose of a 30 day survival clause? ›
These clauses aim to avoid situations where your assets would pass under your beneficiary's estate plan, not yours, when the beneficiary only outlives you by a short time. While these situations are rare, you may want to consider adding this provision to your will or trust.
How long does a survival clause last? ›
the Survival Clause in the APS does not specify that a claim must be made in a certain period. It merely states that the representations, etc. “shall survive Closing and shall continue in full force and effect…for a period of one (1) year following Closing”…
