Agreements of Purchase and Sale and Contract Law
What this domain tests
This domain tests the formation, content, and enforcement of the agreement of purchase and sale (APS). Expect questions on offer and acceptance, conditions, waivers, deposits, representations and warranties, and remedies for breach.
Core rules and concepts
- Formation: offer, acceptance, consideration, and capacity. A counter-offer terminates the original offer. Acceptance must be communicated and unconditional.
- Statute of frauds: contracts for land must be in writing and signed by the party to be charged.
- Conditions: conditions precedent (financing, inspection, sale of buyer's property) must be waived or satisfied in writing by the stated deadline; time is generally of the essence.
- Deposits are consideration and are held in trust; they are generally credited toward the purchase price.
- Representations and warranties in the APS survive closing as specified; the "entire agreement" clause limits reliance on oral statements.
- Remedies: completion (specific performance), damages, and rescission. A seller may retain a deposit only where the contract permits it or a court so orders.
- Amendments must be written and signed by both parties.
Worked example
A buyer's offer is conditional on financing for five business days. On day five the buyer's lender has not responded. The buyer's salesperson says nothing and the deadline passes.
Reasoning: the condition was not waived or satisfied in writing by the deadline. The condition is deemed unfulfilled, and the buyer may be in breach if they do not close. Silence is not a waiver. The correct step is to obtain a written extension from the seller before the deadline, or a written waiver if the buyer accepts the risk. The mark is lost by assuming the deal simply continues because the parties "intended" to close.
Traps that cost marks
- Treating silence or a phone call as waiver of a condition.
- Forgetting that a counter-offer kills the original offer.
- Assuming the seller automatically keeps a deposit on buyer default.
- Relying on oral promises that the entire-agreement clause excludes.
- Missing that time is of the essence for condition deadlines.