Cultum v. Heritage House Realtors, Inc.

Brachtenbach, J.

(concurring) — While I concur in the result, I disagree with much of the majority's rationale.

My starting premises are: (1) there is no such thing as a "simple" earnest money agreement; (2) the fact that it is printed or "standardized" is not relevant; (3) the fact that the form has been approved by a lawyer is not relevant — it is the tailoring of the form to a particular transaction which is critical; (4) the fact that the form is completed incidental to other services of the broker offers no protection to the public; and (5) the fact that the agreement is completed without charge is irrelevant.

A binding earnest money agreement is the document which firmly fixes the rights and liabilities of the parties. A typical form establishes the nature of the title which the seller must convey and the type of conveyance to be made, both of which the buyer must accept. It provides for the respective liabilities of various items by proration at closing. It specifies the nature of the title insurance to be furnished, usually by the seller. I doubt that many buyers know what a preliminary commitment for a standard form purchaser's policy of title insurance is or what alternative types of coverage are available.

The earnest money agreement, if it is a sale on contract, designates the form of the contract including all the terms by which seller and buyer shall be bound. It may attempt to eliminate all representations about very material matters unless contained in the agreement. It sets conditions of default including alternative remedies therefor. It may impose attorney fee liability which might not otherwise exist. It establishes the date of possession, but not whether the date refers to legal or physical possession. This hardly appears to be a "simple" document. I fail to perceive how the complexity of this document is lessened because it is printed.

*635 That the form was initially prepared or approved by a lawyer will hopefully minimize the potential for disputes, i.e., the competent lawyer should have anticipated and provided for those events which most frequently occur in real estate transactions.

However, despite lawyer preparation of the forms, there are two problems. First, the form itself may contain provisions which are inadequate or inappropriate to a particular transaction, or such terms may be omitted entirely. Second, "filling in the blanks" requires at least minimal skill in drafting language as part of a binding document set in the framework of a vast array of statutory law and common precedents.

The earnest money agreement in this case illustrates the hazards of "filling in" the "simple" form. One provided, in part, that the agreement was conditioned on "inspection of plumbing and electrical systems, paid for by purchaser and inspection of heating system." The questions are immediately apparent. Who pays for the inspection of the heating system in view of the way the condition is expressed? Inspection by whom? A qualified plumber, electrician, a general contractor, a city inspector? Is it merely the fact of inspection which satisfies the condition? Must the inspection disclose conditions which are satisfactory to this buyer or to a reasonable, objective buyer? If the inspection discloses a minor defect which can be quickly remedied, does the seller have the option to so remedy? If inspection discloses a major defect, can the seller remedy? Must the corrected system also be inspected to the satisfaction of the buyer?

That an earnest money agreement is prepared incidental to the licensed services of a broker is of little consolation to the parties if it is not properly prepared to reflect the intent of the parties. That it is prepared without separate charge has no bearing on whether its preparation constitutes the practice of law.

I am not naive enough to believe that it is feasible for every earnest money agreement to be drafted anew and *636 tailored to fit a particular transaction. Residential transactions particularly would grind to a halt. Buying and selling real estate, especially residential real estate, realistically cannot be done at the convenience of lawyers' office hours.

I would reach the same result as the majority by forthrightly recognizing that requiring lawyer preparation of every earnest money agreement is not a practicable alternative to the broker/salesperson preparation which works reasonably well in most instances. I would accept the current practice as a fact of life in the real world. The ultimate protection to the public is the requirement that the broker/ salesperson be held to the standard of care of a practicing lawyer. The competent broker/salesperson should recognize when special circumstances require more skilled and knowledgeable drafting. If that decision is made at their peril, hopefully it will be made carefully, keeping in mind the fiduciary relationship and the requirements of the licensing statute.

For the above reasons, I concur in the result but not the rationale of the majority.

Utter, Dore, and Andersen, JJ., concur with Brach-TENBACH, J.

Reconsideration denied March 28, 1985.