Contracts and Contract Law
Formation
A valid real estate contract needs an offer, acceptance, consideration, competent parties, a lawful purpose, and, because of the statute of frauds, a writing signed by the party to be charged containing the essential terms (parties, property, price). Acceptance must be a mirror image of the offer and must be communicated. A counteroffer terminates the original offer and becomes a new offer. Utah recognizes electronic signatures under its version of the Uniform Electronic Transactions Act, so e-signed offers can be binding.
Vocabulary that shows up as questions
- Void (no legal effect), voidable (one party may disaffirm, such as a minor), unenforceable (valid but a defense exists, such as the statute of frauds).
- Bilateral is promise for a promise; unilateral is promise for performance (a reward offer).
- Executory versus executed; express versus implied.
- Assignment transfers rights and the original party stays liable unless there is a novation, which substitutes a new party and releases the old one.
- Contingencies are conditions that must be satisfied or waived; missing a contingency deadline can waive the protection or breach the contract, depending on the clause.
Remedies and traps
Breach remedies include damages, specific performance (land is unique), rescission, and liquidated damages. Earnest money is not automatically liquidated damages; the contract must say so. Courts read time-is-of-the-essence language literally. Exam questions love a buyer who responds by changing one term, which is a counteroffer, not an acceptance.
Rule of thumb: if the response changes any term, it is a counteroffer; if it mirrors every term and is communicated, a contract exists.
Worked example. Buyer offers $300,000. Seller responds in writing at $310,000. Buyer then signs the seller's response. Result: a binding contract at $310,000, because the buyer accepted the counteroffer.