How Does the Addendum for “Back-up” Contract Work?

Some buyers may not know what happens after signing a backup contract on a property. The Addendum for “Back-Up” Contract (TXR 1909, TREC 11-7) explains how and when important actions take place.

Buyers must pay the earnest money and any option fee within three days after the backup contract’s effective date, just like a primary contract. The effective date of the backup contract is the date of final acceptance. This is the date that the last party to sign the backup contract communicates acceptance back to the other party or the other party’s agent, if applicable.

The backup contract is contingent on the termination of the primary contract. The parties have no further performance obligations until the primary contract terminates.

If the primary contract does not terminate by the date inserted in Section B of the addendum, the backup contract terminates and the buyers will receive a refund of the earnest money but not the option fee.

If the primary contract terminates before the date chosen in Section B, the sellers must notify the backup buyers in writing that the primary contract has been terminated. Sellers may use the Seller’s Notice to Buyer of Removal of Contingency Under Addendum for Back-Up Contract (TXR 1913) to make this notification.

The day the backup buyers receive the notice of the termination of the primary contract is the amended effective date. The time for performing all contractual obligations such as delivering the title commitment, surveys, and HOA documents will be tied to the amended effective date.

If the buyers paid for an option period, they may terminate the backup contract at any time while they are in the backup position. If the backup contract becomes the primary contract, the amended effective date becomes day zero of the option period, the following day is day one, and the buyers retain the unrestricted right to terminate until their option period expires.