Contract Law and Real Estate Contracts
Formation and enforceability
A valid contract requires competent parties, offer and acceptance, lawful objective, and consideration. Real estate contracts must satisfy the statute of frauds: in writing, signed by the party to be charged, with essential terms (parties, property, price, and often a description sufficient to identify the land). A counteroffer is a rejection of the original offer plus a new offer; acceptance must be communicated and must mirror the offer. Revocation is effective on receipt; an option contract keeps an offer open because consideration was paid.
Include the familiar vocabulary: executory vs. executed, assignment vs. novation, contingency, liquidated damages (a reasonable estimate, not a penalty), specific performance, escrow instructions, merger clause, and time is of the essence. Earnest money is typically held by a broker or closing agent under escrow terms that specify who gets it on default.
The transaction and its risks
Standard contingencies cover financing, appraisal, inspection, title review, and sale of the buyer's home. When a contingency expires, the party relying on it may lose the right to cancel. Material misrepresentation, fraud, or active concealment of a latent defect supports rescission or damages; mere puffery does not.
Traps: a "verbal counteroffer that the seller later accepts" is unenforceable; an option is not the same as a right of first refusal; and liquidated damages that are punitive will not be enforced. Courts generally enforce a writing that states the parties, property, and price even if minor terms are missing.
Rule of thumb: find the offer, the acceptance, and the communication - if any one is missing or qualified, there is no contract.