Release Date: 11/02/2017
QUESTION: From time to time, I receive offers in which the buyer's agent has not inserted a date in the blank in paragraph 1(j) of Standard Form 2-T. That blank is used to specify the expiration of the "Due Diligence Period." Instead, these agents insert the words: "30 days after the Effective Date." Should I insist that a date be inserted instead?
ANSWER: While inserting a specific date in paragraph 1(j) is typically the best practice for agents and their clients, there are certain circumstances where inserting a time frame instead of a date is advisable in order to protect a buyer's need to complete the necessary due diligence investigation.
The principal reason for inserting a specific date in paragraph 1(j) is because that practice eliminates all confusion as to the exact moment that the due diligence period will expire. The parties will both know that the Due Diligence Period ends at 5:00 p.m. on the date designated in the contract. Certainty has its advantages.
However, buyers who submit offers often do not know how long the contract negotiation process will take. If a buyer believes that it will take a certain period of time to complete the due diligence process, and fills in a date in paragraph 1(j), that buyer runs a risk that the time needed to complete the due diligence investigation will instead be taken up in trying to negotiate a signed contract. For buyers who wish to offer, but also preserve, a relatively short due diligence period, inserting a time frame, rather than a date, is an alternative that can be considered.
Buyers who insert a time frame instead of a date in paragraph 1(j) should recognize that they are adding some degree of uncertainty into what they hope will be a signed contract. To minimize that uncertainty, we can suggest some specific wording. If a buyer would like the Due Diligence Period to start running on the Effective Date of the contract, the buyer should consider inserting the following language in the blank in paragraph 1(j): "the date that is x days after the Effective Date". Since paragraph 1(g) of Standard Form 2-T defines the term "Effective Date” and paragraph 23 defines what constitutes "days," any confusion caused by using a time frame instead of a date should be minimal. For example, say a contract has an effective date of November 1st, and the buyer fills in paragraph 1(j) to say “the date that is 21 days after the Effective Date.” The count of days will begin on November 2nd, and the Due Diligence Period will end at 5:00pm on November 22nd.
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