Real Estate Facts in 500 Words or Less. A Ten-part Series Geared Toward Understanding Some of the Complexities of Connecticut Residential Real Estate in a Flash. Part 1: SURPRISE; YOUR BINDER ISN’T BINDING!
Part 1: SURPRISE; YOUR BINDER ISN’T BINDING!
The Truth About the Non-Binding Nature of Binders in Connecticut.
You would think with the word “bind” included in the title, that the Binder agreement signed on a Fairfield County transaction would be binding on all parties. If that did not make you think the agreement was binding on all parties, perhaps the language, “this agreement to remain in full force and effect and constitute a valid contract between the parties hereto unless, or until, superseded by further contract between the parties…” gave you that impression. However, in both instances you would be wrong.
Typically, a binder is used in Fairfield County Connecticut as an agreement between the parties to negotiate a future contract. Based on Connecticut case law, there are many cases where the Seller has entertained other offers between the binder and the formal Fairfield County contract is executed by the parties. The courts have ruled that if the parties signed a binder/memorandum of terms where at the time they intended to sign a formal, attorney drafted contact in the future, that they are not bound until the attorney-drafted contracts are signed because the binder was not intended to be the final document upon execution. Vito Lombardo et al. v. David Purcell et al. No. CV116021389S Conn. (2011). The additional language stating that it is a binding contract unless or until superseded has been considered to be irrelevant in the eyes of the courts since the parties intended to sign a future binding contract. In Fowler v. Weiss 15 Conn. App. 690 (1988), the courts adopted a three-part test for whether the binder is enforceable by way of specific performance on the breaching party as a remedy for the plaintiff. The courts look at the language of the document, the circumstances surrounding the transaction, and the purpose the parties sought to accomplish by signing the binder. The focus of the court is the intent of the parties when signing the binder.
While signing a binder for the purchase of a property is a step toward home ownership, it is only the first step and no one should be celebrating their upcoming purchase unless a formal Fairfield County contract is signed by both parties.
Lesson: Contact your real estate lawyer when you start the process of searching for a home to discuss all the intricacies of your individual transaction.