The Counteroffer, the Email Acceptance, and the Late Cancellation
A buyer offers $875,000 on a listing priced at $895,000: 3% deposit ($26,250) due within three business days of acceptance, a 17-day inspection contingency, 21-day appraisal and loan contingencies, and a 35-day close of escrow. The seller counters at $892,000 with a $6,000 seller credit toward buyer closing costs, all other terms unchanged, response due by 5:00 p.m. Thursday. On Thursday at 8:40 p.m. the buyer signs the counter and emails a scanned copy to the listing agent, who reads it Friday at 8:15 a.m. and forwards it to the seller; the seller signs Friday at 6:00 p.m. The inspection on day 12 finds a $14,500 foundation issue and a $6,000 roof. On day 13 the buyer's agent sends a written request that the seller credit $18,000 'or the buyer will cancel.' The seller refuses in writing on day 16. On day 19 the buyer delivers a written cancellation and demands the deposit back.
1. When was the contract formed, and when did the 17-day inspection period start?
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The counteroffer was the offer; the buyer's signature was the acceptance. The buyer signed and dispatched the acceptance by email on Thursday at 8:40 p.m. Under California law an acceptance is effective when it is out of the accepting party's possession - the dispatch rule - and electronic signatures and email delivery are enforceable where the parties have not agreed otherwise. The listing agent's Friday morning reading and the seller's Friday evening signature are not conditions of formation; they are administrative.
The only wrinkle: dispatch-based acceptance is the traditional rule, and some practitioners argue email acceptance is effective only on receipt. Here it makes no difference - Thursday night versus Friday morning shifts the clock by one day and changes nothing in the outcome below.
Counting the inspection period. Day 1 is the day after acceptance, so the 17-day inspection contingency ran from Friday. Day 17 fell on a Sunday. The contract extends any deadline falling on a Saturday, Sunday, or legal holiday to the next business day, so the outside date was Monday, day 18. That detail matters in the third task.
2. Was the buyer's request for an $18,000 credit legally effective, and did the seller's refusal end the buyer's right to cancel?
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The request was a request, not a demand that the seller must accept. During an inspection contingency the buyer has three choices: approve the condition of the property, cancel, or request repairs or a credit. A request for repairs or credit is exactly that - a proposal. The seller is free to refuse, and refusal does not put the buyer in breach and does not automatically terminate anything.
What the refusal does is return the decision to the buyer, who must then exercise one of the remaining options inside the contingency window:
- Cancel and recover the deposit, or
- Remove the contingency in writing and proceed.
The 'or the buyer will cancel' threat in a request for repairs has no independent legal effect. It does not convert the request into a cancellation, and it does not extend the deadline. The contingency clock keeps running through the negotiation - a point buyers' agents routinely get wrong.
3. Who gets the $26,250 deposit, and how would the answer change if the seller had delivered the transfer disclosure statement on day 20?
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As written: the seller has the stronger claim. The buyer's cancellation was delivered on day 19, one day after the contingency expired on the extended Monday deadline. Once the inspection contingency expired without written removal or cancellation, the buyer's right to cancel for physical conditions was gone. Cancelling after that point is a breach, and the deposit is subject to the liquidated damages provision. The deposit is $26,250 against a $892,000 price - 2.94% - within the 3% cap the contract places on liquidated damages, so the seller may retain the full amount if the seller elects the liquidated damages remedy and the buyer does not dispute entitlement.
The buyer's counterarguments are that the request for repairs was a continuing negotiation and that the seller's refusal was itself a repudiation; both are weak, and neither revives an expired contingency.
If the TDS arrived on day 20: the analysis flips. Delivery of the transfer disclosure statement and other required disclosures starts a new, separate cancellation right - the buyer may terminate within the statutory period after delivery (generally three days after delivery in person or five days after delivery by mail or electronic delivery with proof of delivery, for a buyer who has not yet taken title). A day-20 delivery would have given the buyer a fresh window to cancel for a disclosure defect, and the deposit would be refundable - provided the cancellation is delivered within that new window and cites the disclosure, not the inspection findings.