What Makes a Contract? | OAR
An Interesting Q & A provided by the Oregon Association of Realtors that I decided to reblog. Useful for consumers and business folks alike that might have a quesiton about what constitutes a contract.
Q. I was under the impression that there are five items that need to be included in a sales agreement to make it binding. I just was told earnest money is not one of those items, as the consideration is the promise within the agreement. What are the requirements to establish a binding agreement?
A. All you need to have a contract is mutual assent. Courts, however, look for four "elements" before they will enforce a contract. They are capacity, consent, lawful object and consideration. It was long believed (and even taught) that the earnest money in a real estate transaction was the necessary "consideration." As you state, however, the promises alone are sufficient consideration in a bilateral (both parties promise to perform) contract. Courts have also identified what they call "material" terms necessary for enforcement of particular kinds of contracts.
When it comes to real estate, Oregon courts have identified six material or essential terms. The terms are: 1) designation of the parties; 2) identification of the property; 3) the promise to sell and buy; 4) the purchase price; 5) how the purchase price will be paid; and 6) a fixed time and place for the delivery of the deed or closing.
Thanks for reading!
Jeff D Clark
Comments(0)