The Real Estate Market
Driven By Contracts
You may access the Contracts Powerpoint here or read the information below.
by Dr. Larry Hasbrouck
A Contract Must Be
IMPLIED CONTRACT: Demonstrated by ACTS and CONDUCT
K goes into a restaurant and orders a meal. K has entered into an implied contract with the restaurant to pay for the meal, even though payment was not mentioned before the meal was ordered.
Real Estate Contracts Are:
B puts up a sign that says, “If you paint my house today, I will pay you $500.” If H paints B’s house, B will be legally obligated to pay H. B and H have a unilateral contract. On the other hand, if H says to B, “I will paint your house for $500,” and H replies, “I will pay you $500 for painting my house,” they have a bilateral contract: a promise exchanged for a promise.
EXECUTORY CONTRACT: Something Still Needing To Be Performed.
EXECUTED CONTRACT: All Promises Fulfilled.
OFFER (Offeror): A promise made by one party requesting something in exchange for that promise.
ACCEPTANCE (Offeree): A promise to be bound by the exact terms of the offeror’s promise
TRANSMITTAL OF ACCEPTANCES & REVOCATIONS
Jan. 3 A offers by mail to sell Landacre to B for $2,000/acre
Jan. 4 B mails an acceptance
Jan. 5 A mails a letter to B revoking her previous offer
Jan. 6 B receives the letter of revocation
Jan. 7 A receives the mailed acceptance
A contract exists on January 4 since an effective acceptance was delivered to A’s implied agent prior to actual receipt by B of A’s letter of revocation.
The law of transmittal of acceptances and revocations is based upon fairness and establishes firm rules that a businessperson may rely upon in decision making.
Many jurisdictions have expanded the implied agency rule to apply to any reasonable mode of communication.
An offer may be revoked anytime before it is deemed accepted. Revocation is effective upon actual receipt by the offeree.
CONSIDERATION: Something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from some act. There must be a definite statement of consideration in a contract to show that something of value was given in exchange for the promise.
“Dear Uncle – I am now 21 years old today, and I am now my own boss, and I believe, according to the agreement, that there is due me $5,000. I have lived up to the contract to the letter in every sense of the word.”
In response to this letter, Story admitted the indebtedness but at no time did he pay it. Story died, and this action was brought against Sidway, the administrator of his estate. The lower court rendered judgment for the defendant (Sidway).
The Court of Appeals Ruling: UPHOLD / REVERSE
BREACH OF CONTRACT: Violation of any of the terms or conditions of a contract without legal excuse.
SPECIFIC PERFORMANCE: Court requires seller to convey the property or give damages
LIQUIDATED DAMAGES CLAUSE:
CONTRACTS IN REAL ESTATE
Buyer acquires an Interest in the Land when contract is signed by
Buyer and Seller. The Buyer has EQUITABLE TITLE.
Before the close the Seller has LEGAL TITLE.
Common Law – Buyer Beware (Caveat Emptor)
Uniform Vendor & Purchase Act – Seller Beware
ESCAPE CLAUSE – Continue to Market Property
CONTINGENCIES – Creates a Voidable Contract
DISCLOSURE – Part of Sales Contract
(OPTION ENFORCEABLE BY OPTIONER ONLY
LAND CONTRACTS / INSTALLMENT CONTRACT
Seller not obligated to execute and deliver a deed until all terms of the contract are met.