Agreements of Purchase and Sale and Contract Law
What this domain tests
This domain tests contract fundamentals applied to the standard offer: formation, conditions, deposits, waivers, amendments, and remedies for breach. Expect questions on when a contract becomes binding, what makes a condition enforceable, and how a buyer or seller can lose or preserve rights.
Core rules and concepts
- Formation. A binding contract needs offer, acceptance, consideration, capacity, and legality. Acceptance must be communicated; a counter-offer extinguishes the original offer.
- Statute of frauds. Agreements for the sale of land must be in writing and signed by the party to be charged.
- Conditions precedent make the contract conditional until satisfied or waived. Common examples are financing, inspection, and sale of the buyer's property. A condition must be clear about who benefits and the deadline.
- Deposits are consideration and evidence of good faith. They are typically held in trust and credited to the purchase price on closing. Forfeiture on buyer default depends on the contract and on the court's assessment of whether forfeiture is unconscionable.
- Time is of the essence clauses mean deadlines are strict; missing them can be a fundamental breach.
- Waiver and amendment must be in writing and signed by both parties to be safe; oral waivers create evidentiary risk.
- Remedies. Breach may give rise to damages, specific performance, or rescission. The seller's remedy for a failed closing is usually damages or retention of the deposit, not automatic double recovery.
- Representations and warranties about the property survive closing only if the contract says so; otherwise the doctrine of merger may extinguish them.
Worked example
An offer includes a financing condition due at 5 p.m. Friday. At 4 p.m. Friday the buyer's lender declines. The buyer emails the seller's agent asking to "extend a few days." The seller does not reply. On Monday the buyer removes the condition and demands completion.
Reasoning: the condition deadline passed without written waiver or a signed amendment. The buyer's email is a request, not an agreement, and the seller's silence is not acceptance. The contract became firm only if the condition was properly waived in writing by the deadline; failing that, the buyer's protection lapsed and the seller may treat the contract at an end or hold the buyer to it, depending on the clause. The lesson: waivers and extensions must be documented and signed before the deadline.
Traps that cost marks
- Treating an email request as an effective extension without signed acceptance.
- Assuming a deposit is automatically refundable if financing fails after the deadline.
- Forgetting that a counter-offer kills the original offer.
- Assuming all pre-closing representations survive closing without a survival clause.
- Ignoring time-is-of-the-essence language on closing dates.