Contracts
Contract Essentials
A valid contract requires offer, acceptance, consideration, legal capacity, and lawful purpose, plus mutual assent. A listing agreement is an employment contract; a purchase agreement is a contract for sale; an option is a unilateral contract to keep an offer open. Traps: confusing void (no legal effect), voidable (one party may rescind), and unenforceable (valid but barred, e.g., Statute of Frauds). Real estate contracts for the sale of land generally must be in writing and signed by the party to be charged.
Performance and Discharge
Know executory vs. executed, assignment vs. novation (novation releases the original party), and breach remedies (specific performance, damages, rescission, liquidated damages). The earnest money deposit is consideration, not the full price; if the buyer defaults, forfeiture depends on contract terms and state law. Contingencies (financing, inspection, appraisal) are conditions precedent that must be satisfied or waived. Time is generally of the essence when stated.
Disclosures and Special Clauses
Understand escrow instructions, the Statute of Frauds, the parol evidence rule (prior negotiations generally excluded from an integrated writing), and the difference between a counteroffer (rejects the original offer) and an acceptance (mirror-image). Contingency and kick-out clauses, right of first refusal, and option contracts are frequent question topics.
Worked Example
A buyer offers $300,000; the seller responds "$310,000." This is a counteroffer, which terminates the original offer; the buyer may no longer accept the $300,000 terms unless the seller revives them.