What Does that Term Mean?

The C.A.R. Form California Resident Purchase Agreement and Joint Escrow Instructions (RPA) commonly used by real estate agents contains several specially defined terms with important significance to the contract and transaction.  The specially defined terms can be found in paragraph 30 of the RPA revised 12/15 form and near the end of most of the other C.A.R. form contracts.

A specially defined term is a term that has a specific definition provided within the document or contract.  For instance, in Paragraph 30.E. of the RPA, the specially defined term “‘Copy’ means copy by any means including photocopy, NCR, facsimile and electronic.”  Specially defined terms are either written with initial capital letters (e.g. “Electronic Copy”) or all capital letters (e.g. “ELECTRONIC COPY”).  The RPA uses initial capital letters for specially defined terms.

When a special definition is provided for a specially defined term, the special definition will apply throughout the contract unless explicitly stated otherwise.  Thus, it is imperative to write the specially defined term with either initial capital letters or all capital letters to signify that it is a specially defined term with a special definition.  However, real estate agents preparing their own clauses, forms, and contract language will commonly make the mistake of either utilizing a general term when a specially defined term is already specially defined by the RPA or not using initial capitalization of the specially defined term in the RPA to signify that the term is specially defined and that the special definition should be applied to the term.

Here are a few particular examples from the special definitions in Paragraph 40 of the RPA that can be problematic if the specially defined term is not initially capitalized to signify it as a specially defined term:

·       “'Acceptance’ means the time the offer or final counter offer is accepted in writing by a Party and is delivered to and personally received by the other Party or that Party's authorized agent in accordance with the terms of this offer or a final counter offer.”  Paragraph 30.A.  Sometimes, agents will incorrectly deem the date of acceptance in writing as the date of Acceptance.  However, the specially defined term for “Acceptance” also includes the personal receipt by the other Party or authorized agent.  The general usage of the term, “acceptance”, could include only the date of acceptance, not the personal receipt of the acceptance by the other party.

·       “‘Close Of Escrow’, including ‘COE’, means the date the grant deed, or other evidence of transfer of title, is recorded.”  Paragraph 30.D.  Sometimes, agents will incorrectly deem the “Close Of Escrow” date as the date that the escrow officer says the escrow is closed or the date of the estimated close of escrow.  However, under the special definition provided in the RPA, the only relevant factor for determining the “Close Of Escrow” is the recording of the grant deed or other evidence of transfer of title.

·       “‘Days’ means calendar days. However, after Acceptance, the last Day for performance of any act required by this Agreement (including Close Of Escrow) shall not include any Saturday, Sunday, or legal holiday and shall instead be the next Day.”  Paragraph 30.F.  Perhaps the most important aspect of this special definition is the extension of time “for performance of any act.”  Thus, any deadline to complete inspections, approve disclosures, remove contingencies, or close escrow is extended to the next non-weekend, non-holiday day.  Sometimes, agents will incorrectly write the term, “days”, which would arguably be only calendar days and not include the extension provided in the special definition of the RPA.

These are just some particular examples of the special definitions provided in the RPA and repercussions of not using the properly initial capitalized, specially defined term.  If a special definition is provided in the RPA, agents should use the specially defined term with initial capitalization.

Esquire Real Estate provides the services of both a real estate attorney and real estate broker and is able to draft and advise you regarding additional specially defined terms that might be useful to your particular transaction.  Please feel free to contact us with any questions or for a free consultation.