Unilateral Contract vs. Bilateral Contract.
A real estate sales contract is a "bilateral" (two-way) agreement. The seller agrees to sell, and the buyer agrees to buy. Compare this with an option; an option is a unilateral (one-way) agreement in that the seller is obligated to sell, but the buyer is not obligated to buy - it is his option to do so. A bilateral agreement with a "liquidated damages" provision has the same result if the buyer fails to close escrow then the seller keeps the buyer's earnest money and (most likely they argue over who is right and whos is not so the courts keep it anyway.)
Basic Legal Requirements of a Real Estate Contract.
There are some basic requirements that must be present to make a real estate contract valid:
Mutual Assent. As stated earlier, there must mutual agreement or "meeting of the minds."
In Writing. With few exceptions, a contract for purchase and sale of real estate must be in writing to be enforceable. Thus, if a buyer makes an offer in writing and the seller accepts orally, then backs out, the buyer is out of luck
Identify the Parties. The contract must identify the parties. Although not legally required, a contract commonly sets forth full names and middle initials (it helps the title company in preparation of the title commitment).
Identify the Property. The contract must identify the property. Although not required, the legal description should be set forth. A vague description such as "my daddys farm" may not be specific enough to create a binding contract.
Purchase Price. The contract must state the purchase price of the property.
Consideration. A contract must have consideration to be enforceable. Consideration is the benefit, interest or value that induces a promise; it is the glue that binds a contract. The amount of the consideration is not important, but just that there is consideration at all.
Signatures. A contract must be signed to be enforceable. The party signing must be of legal age and sound mind.
If you are entering into a contract for purchase of a home and do not understand hire an attorney. It will probably be the best $400 you ever spend.
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