Postponement of closing date: Overview, definition, and example
What is postponement of closing date?
Postponement of closing date refers to a delay in the scheduled completion of a transaction, usually in real estate or business acquisitions. The closing date is when the final documents are signed, payments are made, and ownership officially transfers. However, sometimes unforeseen issues—such as financing delays, missing paperwork, or inspection problems—can push this date back. A contract may include a clause allowing for an extension under specific conditions.
Why is postponement of closing date important?
Delays in closing can happen for many reasons, and a well-drafted postponement clause helps avoid confusion and legal disputes. It provides a clear process for extending the closing date while ensuring that neither party unfairly backs out of the deal.
For example, if a buyer is waiting for final mortgage approval or a seller needs more time to resolve a title issue, a postponement clause can allow for an extension instead of forcing the deal to collapse. Without such a clause, a delay might lead to penalties, legal action, or even the cancellation of the agreement.
Understanding postponement of closing date through an example
Imagine you're a small business owner buying a retail property. Your contract states that closing will happen on March 15. However, your lender needs more time to finalize financing, and the process won’t be completed until March 30.
If your contract includes a postponement clause, it may allow for an automatic extension under specific conditions—such as requiring written notice and setting a new deadline. Without this clause, the seller might have the right to cancel the deal, keep your deposit, or demand additional payments for the delay.
An example of a postponement of closing date clause
Here’s an example of how a postponement clause might appear in a contract:
“If either party requires an extension of the Closing Date due to unforeseen circumstances beyond their reasonable control, including but not limited to financing delays or title clearance issues, the Closing Date may be extended by up to [number] days upon written notice to the other party. Any further extensions shall require mutual agreement.”
This clause ensures that both parties have a fair chance to complete the transaction while preventing unnecessary cancellations.
Conclusion
A postponement of closing date clause helps protect both buyers and sellers by allowing flexibility when delays happen. For SMBs involved in property purchases or business acquisitions, having this clause in a contract can prevent unnecessary stress, financial loss, and disputes.
If you’re entering into a transaction where timing is critical, make sure your contract includes a clear process for handling closing date delays. This can save you from last-minute problems and keep your deal on track.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.