What Time Must We Settle?

A contract is ratified.

Between contract ratification and closing, the agents coordinate a settlement time for their clients, perhaps together, or perhaps at different times and even different places.  On the date of settlement identified in the contract, the seller shows up at the time scheduled and signs all the required paperwork.  However, the buyer, who had scheduled their closing for 1pm that same day, does not show up (for purposes of this article, the reason doesn’t matter). 

However, later that evening at 9:45pm, the buyer signs all the required paperwork and both the buyer and lender deliver all required funds for closing to the settlement agent.  Has settlement occurred?

There seems to be some confusion surrounding the only language in the contract that identifies a deadline relating to time as opposed to a day.

As a baseline starting point, settlement does not occur unless and until all the required documents are executed by both buyer and seller and all monies are accounted for by the settlement agent.  Paragraph 4 states in relevant part that, “Seller and Buyer will make full settlement in accordance with the terms of this Contract . . . on, or with mutual consent before,______.”  This paragraph identifies the day on which the parties agree to settlement.  Paragraph 37 states that time is of the essence.  So we know that the agreed settlement date is a true deadline.  But that date just identifies a day.  The settlement provision does not identify a time for settlement.

The time for settlement is scheduled by the realtors or their clients directly with the settlement company.  That scheduled time is done outside the bounds of the contract.  In other words, the contract does not bind the parties to the settlement time the way it does the settlement date.  A reading of the contract reveals one provision that references a time of day.  Provision 33, sub paragraph E states, “[f]or the purpose of computing time periods, the first Day will be the day following Delivery and the time period will end at 9 p.m. on the Day specified.  If the Settlement falls on a Saturday, Sunday or legal holiday, then the Settlement will be on the prior business day.”

Although a time is identified along with a reference to “Settlement” later in subsection “E”, a plain reading of the sentence reveals that its purpose is to compute time periods following a Delivery.  In other words, it determines the date by which one party must respond to the other after a Delivery has been made that requires a response.  It is understandable, but incorrect, that one may read subparagraph E as somehow tying in the Settlement to the time (9 p.m.) identified in the previous sentence.  However, unlike the Settlement date, which is already identified in the contract (see above) and therefore does not require the calculation of a response date, deadline dates for the home inspection contingency, lender required repairs, financing contingency response assuming Seller delivers the “three day notice”, etc. do not identify the day on which a response is required.  Rather, the time for response must be calculated pursuant to provision 33, subparagraph E to identify the response date, on which date the deadline is 9 p.m.  Consequently, the language of provision 33, subparagraph E can only be read as relating to responses to Deliveries (which must be calculated) and not the Settlement Date (which does not require calculation).

Thus, absent language written into the contract about a time deadline for settling on a particular day, we must conclude that as long as settlement is completed by 11:59pm on the day identified for settlement in provision 4, the buyer has met their obligations under the contract.