Caveat Venditor: McCarthy v Tobin: Seller Beware

When entering a purchase transaction, buyers understand that their deposit money is at risk should they decide to terminate for reasons not explicitly outlined in the contract.  But what happens when a seller attempts to terminate an Offer to Purchase contract? Below, Jamaica Plain attorney Jeremy McHugh explains the risks and related case law:


Caveat Venditor: McCarthy v Tobin: Seller Beware


In the case of McCarthy v. Tobin,, the Supreme Judicial Court of Massachusetts (SJC or the Court) held that an Offer to Purchase may be a binding contract, notwithstanding the failure of the parties to execute a subsequent P&S Agreement. In Tobin, the Court deemed a  P&S Agreement referenced in an Offer to Purchase (OTP) to be merely a "polished memorandum of an already binding contract." As a result, the buyer could enforce the right to purchase the property despite the fact that the seller never signed a P&S Agreement, but only a two page Offer to Purchase, even though the execution of the P&S was recited as a condition of the offer.

How did this happen?

First, the seller’s attorney provided the initial P&S draft to buyer’s counsel at 5PM on the day prior to expiration of the P&S deadline, and subsequently effected a waiver of the deadline by continuing to negotiate the terms of the P&S. Secondly, the court applied existing precedents to determine that , notwithstanding seller’s refusal to sign the P&S or accept the deposit, the buyer still had a right to complete the purchase on the terms of the offer. If explicit language to the contrary had been included in the Offer- such as “this offer is NOT a final agreement- it is only a preliminary memorandum in contemplation of a final purchase agreement,” then the result could have been different. But, absent such language, the court found that the offer was a final and legally binding agreement for the sale of the property to the buyer.

Generally speaking, this case means that you need to be very careful in drafting and reviewing offers to purchase, and the best practice would be to have all offers reviewed by counsel prior to execution. The case demonstrates that legal precedent sometimes produces counterintuitive results. Common sense assumptions about the likely outcome of a legal challenge can be dead wrong.

Appellate History of the Case

In 1998, the Massachusetts Appeals Court concluded that John J. McCarthy (Buyer) was entitled to specific performance of a contract to purchase real estate from Ann G. Tobin (Seller). The lower court had decided that Tobin had no obligation to sell the property to McCarthy, instead ruling in Tobin, who had agreed to sell the property to a third party, subsequent to signing the OTP  with McCarthy. The Appeals court reversed this trial court decision, holding that the OTP was a firm offer that became a contract binding on the parties when it was accepted and signed by the Seller. Tobin appealed this decision, and it was ultimately affirmed by the SJC.

Facts of the Case

On August 9, 1995, McCarthy executed an Offer to purchase real estate, on a standardized Greater Boston Real Estate Board (GBREB) form. As the SJC later confirmed, the OTP included all material terms of the deal: a description of the property, the price, earnest money deposit requirements, limited title requirements and the time and place for closing. The Offer also stated that the parties "shall, on or before 5 PM on August 16, 1995, execute the applicable Standard

Form Purchase and sale Agreement recommended by the GBREB, which shall be the agreement between the parties hereto."

Tobin signed the OTP on August 11. On August 15th, after 5PM, Tobin's lawyer sent a draft P&S by fax to McCarthy's lawyer. Six days later, on August 21st, McCarthy’s  lawyer responded by fax, proposing certain changes to the P&S, relating to such things as burden of risk of casualty prior to closing, assurances relating to title, the condition of mechanical systems, etc. On the 22nd, the lawyers discussed proposed revisions. There was no discussion at any time of extending the P&S signing deadline, and Tobin's lawyer did not object to the expiration of the deadline. After further discussions, on Friday August 25th, buyer’s counsel informed seller’s counsel that the agreement was acceptable that it would be signed and delivered the following Monday.

On Saturday the 26th, Tobin accepted an OTP from a third party, named DiMinico. McCarthy's lawyer subsequently delivered the signed P&S and a deposit to Tobin's broker on Monday the 28th, but was informed that the agreement was late and Tobin had already accepted another offer. Tobin signed a P&S Agreement with Diminico in September, 1995, and McCarthy filed suit in the trial court for specific performance prior to closing of the Diminico sale.

On appeal to the SJC, the issue was whether the OTP between Tobin and McCarthy was a binding contract, despite the fact that the seller never signed the P&S Agreement.

It is a basic tenet of contract interpretation that the intent of the parties controls.

The SJC upheld the Appeals court decision, finding that when they signed the offer, the parties intended to be bound by their agreement, reciting that "if the parties have agreed upon all material terms, it may be inferred that the purpose of a final document which the parties agree to execute is to serve as a polished memorandum of an already binding contract."

In other words, under these circumstances the Court found that the P&S Agreement should be considered as merely a "polished memorandum of an already binding contract."

How did the court arrive at this decision?

The Court found that McCarthy's revisions to the P&S were “ministerial and nonessential terms of the bargain," and did not impact the material terms of the deal sufficiently to operate as a counter offer or repudiation of the existing agreement. Thus, the seller was not excused from performing her obligations under the agreement- namely, conveying the property to the buyer on the date set for closing.

Additionally, notice was printed on the OTP that the offer created “binding obligations." The court rejected seller's contention that the “obligations” were merely to "bargain in good faith", instead holding that the offer created the far more concrete obligation to actually convey the property to the buyer upon delivery of the purchase funds on the day of closing.

The court also found that Tobin waived the right to enforce the deadline for signing the P&S.  At the outset, the deadline of August 16th for execution of the P&S was a condition subsequent, meaning that without a signed P&S by that date, the parties’ obligations to each other would be extinguished. However, the court found that Tobin waived the condition for the following reasons:

(1) Her lawyer voluntarily undertook the task of drafting the P&S Agreement, but did not send a draft to the buyer until 5PM on the day before the deadline, such that it was "impossible" for the buyer to sign before the deadline; (2) Tobin’s lawyer did not object to the passage of the deadline in the ensuing discussions, but instead continued to work with buyer's counsel after the expiration of the deadline on a P&S agreement mutually satisfactory to both parties;  and (3) Having determined that Tobin had waived the deadline, the court further found that time was no longer of the essence, and that the buyer's subsequent tender of the signed agreement with the required deposit was timely and within reason.

So, even though the parties explicitly conditioned their Offer contract upon execution of a mutually satisfactory P&S agreement, it turned out that the seller lost the right to cancel the deal when his lawyer first sent the P&S draft too close to the deadline, and subsequently continued to negotiate terms of the P&S with buyer's counsel.


If you want to ensure that you have the further flexibility of cancelling an offer contract, you should ensure that specific language is included in your OTP as recommended by the Court. Conversely, if you want to ensure that an offer remains a binding contract even in lieu of an executed P&S, include the words “binding contract,” exclude any language to the contrary, make certain that the initial draft is circulated long before the expiration of the deadline, and be secure in the knowledge that legal authority supports your right to insist on moving forward with the transaction even if the other party refuses to cooperate in negotiating and signing a mutually satisfactory P&S Agreement.

Of course, these suggestions are not intended to serve as specific legal advice in any particular situation, and the wisest and safest course of action is to obtain legal advice from a licensed attorney prior to signing an offer contract.


Real Estate Purchase Timeline

Following is a helpful outline for real estate purchase transactions, courtesy of Boston, MA real estate Attorney Jeremy McHugh.  

Buyers very often have questions about the timing of their purchase, especially in relation to doling out cash. This outline provides a basic framework for understanding the key deadlines, documents, and disbursements for a typical single family residence or condominium unit purchase in Massachusetts.

  1. First week: Offer to Purchase:  ($1000 deposit). Mortgage loan pre-approval in hand. Material terms of the deal are established:
    1. Purchase price;

    2. Closing date;

    3. Deadline for execution of P&S Agreement;

    4. Mortgage contingency date and amount of loan;

    5. Inspection contingency- date and amount of allowable repairs. Potential re-negotiation of purchase price depending on results of inspection report.

    6. Condominium governing document review contingency (if applicable)

    7. Appliance / Fixture inclusions / exclusions.

  2. Second Week: P&S Agreement signed. Deposit balance of 5% of purchase price into listing broker’s escrow account. Legal and financial obligations of buyer and seller during the escrow period are established. Key events for buyer:

    1. Complete mortgage loan application within 48 hours of P&S execution;

    2. Listing agent schedules Appraisal, which buyer pays for. Appraisal report must show fair market value of the property that is equal to or greater than the purchase price.

    3. Buyer complies with lender’s document requests diligently.

  3. Fifth Week: Mortgage Contingency / Commitment Letter date.

    1. Appraisal report received by buyer prior to expiration of mortgage contingency. If the report shows FMV too low, buyer either terminates or restructures the deal, depending on seller and lender options.

    2. Commitment Letter: lender’s commitment to disburse the loan funds at closing.

      1. Conditioned upon buyer satisfying any outstanding conditions such a verification of cash to close, ongoing employment, etc.

      2. If letter is not received by the deadline, or if the letter contains conditions that are not “reasonably within buyer’s control,” buyer’s counsel will either terminate the deal or negotiate an extension of the deadline.

  4. Seventh Week: Closing. Buyer and seller meet to exchange money for title deed & keys to the property.

    1. Buyer’s cash to close=(Price + Closing Costs) – (Loan Amount + Deposit).  Buyer brings a cashier’s check for the funds to close.

    2. Closing attorney will pay off any outstanding mortgages, property taxes, and any other liens.

    3. The deal is “official” when the deed is recorded. Only then will proceeds be released to seller and buyer take possession of the property.

    4. Move in to your new home.


Jeremy McHugh can be reached at

How Much Will I Net from My Sale?

When selling your Massachusetts residential single family home or condominium unit, one of your first questions will be "how much of the sale price will I actually receive when all fees and taxes have been deducted?"  This question will eventually be answered when the closing attorney drafts the HUD-1 settlement statement- but this often happens within a day or two of closing. So, we have devised a simple spreadsheet to calculate a very close estimate of the net proceeds of sale to the seller of real property.

CLICK Here for an example spreadsheet. Feel free to call or email for a customized spreadsheet based on the particulars of your transaction.

Generally speaking, the main expenses of the sale are the following:


  • Broker's commission: 5%-6% is the common range for real estate broker fees in Massachusetts. Customarily, the seller will pay the full amount of the commission, with the buyer's agent receiving a 50% share of the commission. Of course, it is possible to consummate a sale without the aid of 2 real estate agents, but in the majority of transactions, it is the efforts of two agents working together that result in a mutually satisfactory deal.

  • Mortgage Payoff: You will need to obtain a Mortgage Payoff Statement from your lender, which will provide the exact amount due to release the mortgage lien as of the day of closing. In Massachusetts conveyancing practice, the closing attorney allows three business days after closing for processing the file and sending the payment in by courier or wire. This Mortgage Payoff Statement is different from your monthly statement: the Payoff Statement makes reference to a specific "good through" date, to which daily interest charges are calculated.

  • Deed tax: Calculated as $2 per thousand of the consideration stated in the deed- ie, the sale price.

  • Seller's counsel fee: ranges from $800 to $1200 or so for the normal residential transaction

  • Discharge tracking fee: $100-$150: If you have one or more outstanding mortgages on the property, the closing attorney's office will often charge this fee in consideration of their obligation to ensure that your mortgages are fully paid off within 3 days of closing and the proper lien release documents are recorded at the Registry of Deeds.

  • Recording fees: $75-$225. Depending of the circumstances: if you are selling a condo unit, you will pay $75 to record a 6D certificate of no unpaid common charges, each mortgage discharge is $75, etc.

  • Final water bill: varies, usually $40-$200.  At closing the amount of any water and sewer bills will be deducted from the proceeds of sale and used to pay the bill in full. Usually this will not be charged to you for a condominium sale, as the water bill is customarily a common expense and as such, paid by the condominium trust.

  • Credits back to the seller:

    • Prorated, prepaid property taxes.  In most municipalities, taxes are paid quarterly, due on the first day of the second month of the quarter. Thus, if you close on Feb 15th, you have already paid the tax bill for the period from January 1 to March 31st. Thus, the buyer will credit back to you the prorated amount of the tax  bill from Feb 15th to March 31st.

    • prorated, preapid condominium monthly fee. Condominium fees are due on the first day of the month, so you will have prepaid the fee if closing on any day other than the first day of the month: in which case the buyer will have the obligation to pay the fee for that month.

    • Value of fuel oil in tank, if applicable.  You will need to obtain a reading by your fuel oil supplier of the value of the remaining fuel in the tank.

To obtain our estimate, we simply add up the total credits to the purchase price, then subtract out all of the fees and expenses. You should be aware that all disbursements out of the proceeds discussed above will be made by the closing attorney (aka settlement agent), so that as the seller you will not be responsible for paying off the balance of your mortgage, final water bill, etc. Please refer to our spreadsheet for a useful tool to use for your own sale.