Contracts

To be valid, contract must contain these elements:

Both parties must be 18.

Offer and Acceptance, also known as Mutual Assent or Meeting of the Minds. An offer must be made by an offeror (buyer) and accepted without changes or additions by offeree (seller). If something is changed or added, it is called an addendum, which is added to the contract, and both parties must sign it.

Statue of Frauds requires that deeds and real estate contracts must be in writing to be legally enforceable.

Must be entered in for legal purpose.

There must be a legal consideration – something of value, but legal (can’t be a stolen painting or a ball of weed).

Reality of Consent – the contract must be entered into without duress, misrepresentation, or fraud. The parties cannot be drunk or high, or incompetent (incompetent doesn’t mean illiterate. An illiterate person can sign by a cross, and it would be legal). The innocent party is not obligated to perform.

If one of the above elements is missing, the contract is void.

It is voidable by one party if contract is entered under duress, while drunk, or there is a contingency that can’t be met. It is voidable if one party finds out that he or she is being scammed.

When neither party can sue for the performance, the contract is unenforceable. Like, for instance, when it isn’t in writing.

A sales contract is an Executory Contract, meaning, both parties have duties to perform. When both parties did what they were supposed to do, the contract is Executed.

Unilateral Contract - only one party obligated to perform.

Bilateral Contract - both parties obligated to perform.

Express Contract - both parties agreed to enter into the contract in writing or orally.

Implied Contract - the parties are behaving as if there is a contract - like parking in a parking lot. 

Breach - is when a person doesn't perform as agreed in the contract.

When a person says he bought a farm on a contract, he means Land Contract. In a Land Contract the seller (vendor) finances the property and keeps the title. The buyer receives Equitable Title - the rights to use the property as if he had the title, until the seller is paid up and gives the buyer the Legal Title.

Assignment - is a transfer of rights from one contract to another, from one person to another. Contracts may include a clause that either forbids or allows assignments

Novation - the old contract is substituted by a new contract, releasing the liability of the old contract. Like in cases when a person assumes someone's loan, and the bank is okay with it, qualified the new buyer, and writes up a new contract, releasing the seller from the responsibility in case the new buyer doesn't pay.

Contingency - makes a contract voidable if something isn't according to specifications within a certain period of time. Like if the buyer inspects the house and finds mold in the attic. Or if the buyer's lender can't provide the loan after all. The contingency must have a reasonable date after which it is no longer valid, so that the buyer can't change his mind at the last minute.

Forfeiture Clause - states that in case of a breach the guilty party must give some compensation - like Earnest Money.

Suit for Performance - if the seller changes his mind, the buyer can sue him.

Caveat emptor - means, let the buyer beware 

Caveat venditor - let the seller beware

Exculpatory clause - hold harmless clause - relieves the party of liability for damages to another. 

Indemnification clause - one party agrees to compensate the other party for any damages that might occur.

The party making an offer is the offeror, the party receiving it is the offeree. An offer becomes a contract when accepted/signed without changes. If there is a counteroffer, the original offer is void, and the counteroffer becomes a contract when the counteroffer is accepted/signed without changes. An offer usually has time specified for performing of different things - so much time to accept or to turn in a counteroffer, so much time for inspection, so much time for loan to close, etc.  If the contract contains the words "time is of the essence" then the party that's late can be found in breach of contract and can lose the Earnest Money, so watch out for these words.

Agents are obligated to present all offers. Sometimes a busy agent might say, he doesn't think your offer is good enough and doesn't want to waste his time. That agent cannot say that, he must present all offers, and you can tell him that, and he cannot legally refuse to do it. Even if there are other offers, even if the seller already signed an offer, the agent still must present your offer, informing you, that it is a back-up offer, in case something goes wrong with the first one, or if there is some contingency that's not met on time, that will give the seller a way out, so he can take your offer instead.