What is an “Escape Clause”?

by Rattana Thong

You might have heard or even seen this term if you are currently buying or selling and wonder what it is?

Essentially, an Escape Clause can be written into the Agreement of Purchase and Sale for the benefit of the Seller. If a Buyer has made an Offer to the Seller with Conditions that may need time to fulfill or the Seller is not confident the Buyer is able to fulfill those Conditions, they can include an Escape Clause to allow other Buyers to put in a potential Offer. The initial Buyer could have a Condition where they need to sell their house and their house may not sell. If another Buyer puts in an Offer, the Seller will give the first Buyer a chance to either Waive or Fulfill their Conditions within a 24 hour-72 hour time period. If the first Buyer cannot firm up their Conditions – the Seller can escape the first Offer and accept the Second Offer. First Offer is no longer valid.

Here is an example of an Escape Clause:

Provided further that the Seller may continue to offer the property for sale and, in the event the Seller receives another Offer satisfactory to the Seller, the Seller may so notify the Buyer in writing by delivery to the Buyer personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto. The Buyer shall have __________ hours from the giving of such notice to waive or remove this condition by notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto, failing which this Offer shall be null and void, and the Buyer’s deposit shall be returned in full without deduction.

As a Buyer, before you commit to any deal, make sure you speak to your Lawyer and are aware of any risks you may put yourself in by waiving any Conditions you haven’t met. You could potentially be setting yourself up for a lawsuit if you move forward in any Agreement that results in an unsuccessful closing on your part.