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Let's say Aaron (property owner) and Bob (prospective tenant) are considering entering into a lease. They reach preliminary agreement verbally, and so Aaron drafts a lease agreement, signs it, and sends it to Bob for his signature. (Suppose Aaron is managing the property remotely, from a far-away city, so they can't meet in person for the signing). Let's say this happens about 2 months before the start date of the lease.

At this point, Bob has a lease agreement with Aaron's signature on it. It seems to me that if Bob is unscrupulous, he can delay adding his signature for up to 2 months. He can look for a better deal on a different apartment for that entire time. If he finds a better deal, he can simply tear up the contract with Aaron - after all, he never signed it! If he doesn't find a better deal, he can simply add his signature to the contract with Aaron to make it binding.

On the other hand, it seems to me that Aaron is at a significant disadvantage - he cannot look for other tenants and sign anything with them, because at any point Bob can make the original lease valid, and force Aaron to lease to him.

I realize that the lease itself could have some wording to solve this issue (e.g. "only valid if signed by both parties by such-and-such date"), but - for example - the standard lease agreement I've seen used in Washington State doesn't have any such clauses.

So, my questions are:

  • Is my understanding correct? Can Bob indeed delay signing, putting Aaron at a significant disadvantage? Or is there anything in law that would prevent such a trick on Bob's part?
  • Does the answer change if this is lease renewal and not a new lease?

In case it matters, the jurisdiction I am most interested in is Washington State, USA.

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Common Law Contracts

Contracts do not have to be signed. They do not even have to be written down. In fact, the overwhelming majority of contracts entered into are not written – when did you last sign a contract to buy a cup of coffee? See What is a contract and what is required for them to be valid?

A contract is an enforceable agreement. It exists from the moment that agreement was reached irrespective of who signed what. Putting a signature on a contract is evidence of the contract: it is not the contract.

Real Estate

Having said this, real estate law is an area where legislators can't leave the common law alone and is generally subject to specific regulation. For example, it is quite common that real estate contracts must be in writing and are unenforceable if they are not. However, while the contract may not be enforceable, the promise might be.

Promissory Estoppel

The common law as we know it today is actually derived from two different stands of English law: the actual common law as decided by the magistrates, and equity law as decided by the King/Queen in the courts of Chancellery.

In the absence of a contract there is nothing the common law can enforce. However, principles of equity law are grounded in notions of fairness (or equity – see how that works?). If I were to make a promise to you (that was not a contract) and you took action on the strength of my promise that would be to your detriment and I knew you were doing that: promissory estoppel would prevent me from breaking my promise or allow you to recover damages (more or less – in practice a promissory estoppel suit is usually an act of desperation).

Your lease

When was the contract formed?

  • If the agreement had been reached and the written lease simply documented that agreement without adding anything new, then the contract is already on foot and both Aaron and Bob are bound.
  • If agreement has not been reached or there were additional terms in the document (which there almost certainly would be) then by putting forward the document Aaron is making an offer to Bob. By extending the offer, Aaron knows that he cannot lease the premises to someone else until the offer has been rejected or he withdraws the offer: this is true irrespective of whether Aaron has signed or not. If Bob accepts that offer without changing it, then the contract exists from the moment of Bob's acceptance irrespective of whether he has signed. If Bob makes changes (other than inconsequential ones) then he has made a counteroffer: the ball is now in Aaron's court and the original offer is dead.

Promissory estoppel can arise if, for example, the negotiations ends with Bob saying, "I'm looking at several places but yours would be the one I want if you were to change the carpets," Aaron send Bob carpet samples, Bob picks one, Aaron makes the change, and Bob then walks away.

  • Thanks! I'd like some clarification on this point: "Aaron knows that he cannot lease the premises to someone else until the offer has been rejected or he withdraws the offer". So how does this withdrawal work? Basically, if Bob fails to add his signature to the lease in reasonable time, can Aaron simply inform Bob that the offer has now been withdrawn? – Eugene Oct 27 '16 at 4:01
  • Basically, when and how is Aaron legally allowed to "withdraw" an offer (that was made in the form of a contract with Aaron's signature)? – Eugene Oct 27 '16 at 4:04
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    An offer can be withdrawn at any time by communicating the withdrawal to the other party. It cannot be withdrawn once it has been accepted as a contract already exists. – Dale M Oct 27 '16 at 4:23
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Aaron can send the agreement unsigned, as an offer, to Bob. If Bob accepts the offer and signs it (and sends it back to Aaron), following RCW 59.18.065, Aaron must provide an executed copy to each tenant who signs the rental agreement. That would solve Aaron's problem (though he actually doesn't have a problem). It is not required that parties to an agreement be in the same room to sign an agreement.

59.18.060(12)(a) requires signatures by all parties on a fire safety information checklist and (c) states that "The written notice or checklist must be provided to new tenants at the time the lease or rental agreement is signed". This might suggest that a signed rental agreement is required. However, at common law, a signature is simply one way of establishing that there is an agreement, and Washington law does not directly require signatures on a lease. An email from Bob indicating acceptance of the lease would also establish an agreement (if it is clear that it's an agreement – a return email saying "Thanks!" is insufficient). Signatures are taken to be absolute evidence to having agreed (except if you can show that there was a misunderstanding, i.e. there was no "meeting of the minds"). Aaron could make it an explicit condition of the agreement that there is no agreement unless both parties sign, which would make a signature mandatory. In lieu of such a term, the simple presence of a line for parties to sign does not, as far as I know, make a signature mandatory, and agreement can be indicated in other ways (though certain kinds of agreements may statutorily require signatures and witnesses, such as a mortgage).

Turning the tables, Aaron puts himself on the hook somewhat merely by making an offer. Assuming there are no conditions like "must be accepted by date X," once Aaron makes an offer, all Bob has to do is accept the offer, and there is an agreement (binding lease), so Aaron's signature isn't crucial. If Bob doesn't like the terms and changes something (like crosses out something or writes in something), Bob has made a counter-offer – which Aaron can then accept (or not) and it becomes an agreement (if accepted).

Therefore, Aaron needs to include some clause that cancels the offer if both parties are not irrevocably on board with the agreement by a certain date – e.g., "If Bob fails to sign and return this agreement within 14 days of today, this agreement is void."

  • I think you've somewhat obscured the answer to the core question. Part of your answer is, "Signatures aren't required to establish a lease," although presumably if someone says, "Sign the lease to establish the agreement" then signatures are required. The other part is essentially, "Yes, Aaron would be putting himself at a disadvantage by leaving an open-ended offer on the table, and no law protects him from doing so." Right? – feetwet Oct 26 '16 at 21:31

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