Effectively, there are two choices:
1) as soon as the offer is formally accepted, as in “signed, sealed and delivered”, and
2) when all the conditions are satisfied, waived or fulfilled.
Naturally, it makes a difference in terms of interpretation. Some people say 1) and other people say 2).
There are several essential elements of a contract:
1) Parties, (legal capacity)
2) Lawful object (not illegal)
3) Intention to create contract (consideration or seal)
4) Mutual agreement (offer and acceptance)
5) Agreement in respect to terms (genuine intention)
6) Agreement must be certain (definite and clear).
Once those essential elements are all present, then we have a legally binding agreement. There may very well be conditions that need to be fulfilled, satisfied or waived as the contract proceeds, but at the outset, we still have a “binding agreement”.
In dealing with the conditions, the contract itself may specify the consequences, but nevertheless, we started out with a legally binding agreement.
So, why all the problems? Apparently, many waivers, amendments, fulfillments etc. will include a phrase to the effect that “… this agreement is now firm and binding”. That is just confusing. It was already “firm and binding”. There just happened to be an outstanding condition that required resolution.
The result is that some practitioners have come to the conclusion that the contract was not “firm and binding” at the outset, but rather later, upon resolution of the condition. That view would be in error.
Brian Madigan LL.B., Broker is a Manager at RE/MAX West Realty Inc., Brokerage 416-745-2300