Frequently Asked Questions

Legal Hotline FAQ

A blog of the most frequently asked questions to the Maryland REALTORS Legal Hotline.

Cindy Sellers
Cindy Sellers
Cindy Sellers's Blog

What is the difference between one party terminating the agreement and both parties executing a contractual release agreement?

Essentially, the difference lies in whether the Contract permits one party to terminate the agreement under certain conditions (unilateral termination), or whether both parties agree to terminate the Contract and relinquish their right to pursue legal and equitable remedies (contractual or mutual release).The “Time is of the Essence” paragraph permits a party to unilaterally terminate the agreement when the other party fails to perform within the prescribed time frame. Where unilateral termination is permitted in the Contract, consent of the other party is not required, the agreement is no longer binding, and the parties have no further obligation to perform.
In addition to the “Time is of the Essence” paragraph, several other provisions in the Contract (and related addenda) explicitly permit a party to terminate the agreement unilaterally if the other party fails to perform. For example, under the Deed and Title provision, if the seller is unable to cure a title defect and fails to obtain title insurance on the property, the buyer may terminate the Contract. Similarly, in the Buyer Responsibility provision of the Contract, if the buyer misrepresents her financial capability to purchase the property, the seller may unilaterally terminate the Contract. In all of these instances, the Contract language clarifies that mutual assent is not required to terminate the agreement.
Where the Contract permits the seller to unilaterally terminate the agreement, it is our view that the seller may place the property back on the market. If the buyer terminates, the buyer may begin submitting other offers. Of course, the party receiving the termination notice may disagree with the other party’s rationale for voiding the agreement. We make no representation regarding that party’s ability to pursue legal and equitable remedies against the other party. In this regard, it is important that the parties understand that if a party exercises the right to terminate the Contract, the other party is not precluded from pursuing any legal and equitable remedies.
In contrast, a contractual release requires mutual consent and must be in writing. In executing a contractual release, each party agrees to relinquish that party’s legal and equitable rights/claims against the other party and both parties’ obligations to perform are fully discharged.
Keep in mind that a contractual release is different from a release of deposit agreement. (There is often confusion about this because the MAR release forms currently in use address both the deposit and the contract in the same form.)
Thus, although a party may terminate the Contract if the Contract permits, that party must exercise the right in strict accordance with the Contract language. Additionally, the termination notice should refer to the specific provision that the party believes entitles him to end the agreement.
On the other hand, if both parties agree to forego their legal and equitable claims against each other, and both parties intend to fully discharge their obligations, they must both sign a contractual release.
MAR has published two forms to assist in this regard. 

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