The Non-breaching Party Must Affirmatively Cancel the Contract After the Three (3) Day Cure Period Expires
Seller and buyer have entered into an Arizona REALTOR® Residential Resale Real Estate Purchase Contract (Purchase Contract). The Purchase Contract calls for a particular close of escrow date. The buyer was unable to close on the close of escrow date. The seller did not issue a cure notice. The seller asserts that the contract was automatically cancelled when the buyer failed to close on the close of escrow date.
Does the Purchase Contract automatically cancel when a buyer fails to timely close?
Pursuant to the Purchase Contract, either party may cancel the contract in the event of a breach of contract by the other party. (Section 7b.) However, before a breach of contract can occur, a cure notice must be issued and the potentially breaching party must be allowed three days to cure the potential breach before the potential breach becomes an actual breach. (Section 7a.) There is no provision in the Purchase Contract that indicates that the contract automatically cancels if one party fails to close, and the seller does not have the right to cancel based on the potential breach created by the buyer’s failure to close unless and until the seller issues a cure notice to buyer and then three (3) days have elapsed without the buyer curing the potential breach.