OFFERS, CONTRACTS AND RELATED ISSUES: EFFECTIVE CONTRACT WRITING

COURSE OBJECTIVES To provide a substantive review of offers, contracts and related issues to assist licensees to do the following: More effectively explain to clients and customers the process and the documents for writing offers and amending contracts Prepare offers and contracts that are both well-written and legally enforceable

COURSE OBJECTIVES (CONTINUED) To revisit the distinction between an “offer” and a “contract” To review essential elements of a contract To review additional elements required for valid real estate contracts To examine documents for the presence of required elements and the consequent “status” of such documents To review the methods by which contracts are discharged and the implications thereof

I. THE DEFINITION OF AN OFFER A. A proposal intended to create a contract upon acceptance by the person to whom it is made. The offer must state expectations with specificity. Terms of a bona fide offer must be certain enough to be accepted in court. Names of parties and identification of the subject matter must be included clearly An offer must be communicated to be effective. Actual communication occurs when an offer is received Constructive communication occurs whether the offeree, having received the offer, reads it or not.

DEFINITION OF AN OFFER (CONTINUED) B. Generally, an offeror may withdraw an offer at any time before the offeree accepts the offer: Actual communication of revocation makes it effective Communication to agent representing offeree might be sufficient Implied revocation: the offeree learns from a reliable source that the offeror has acted in a manner not compatible with the outstanding offer

DEFINITION OF AN OFFER (CONTINUED) C. An offeree may simply reject an offer by communicating to the offeror a refusal to accept the offer: A counteroffer by the offeree is an implied rejection Deciding to accept after communicating a rejection is still a rejection New attempt to accept a rejected offer results in nothing more than a counteroffer

DEFINITION OF AN OFFER (CONTINUED) D. An offeror may specify an expiration date for an offer: A purported acceptance after the expiration date is ineffective. If no date is specified, the offer lapses after a reasonable period of time.

DEFINITION OF AN OFFER (CONTINUED) E. What an offer “is not”! An offer is not a binding agreement between the offeror and the offeree. An offeror is not bound to accept an “acceptance” of an offer, although some other obligation might accrue by reason of some other agreement. e.g., a seller listing agreement e.g., a buyer representation agreement

DEFINITION OF AN OFFER ( CONCLUDED) F. For an offer to ripen into a contract, the offeree must accept the terms of the offer : Ready, willing, and able acceptance Communication of the acceptance Acceptance of the “acceptance” by the offeror

II. DEFINITION OF A CONTRACT A voluntary, legally enforceable promise between two competent parties to perform a legal act in exchange for a consideration. A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy.

III. THE ELEMENTS OF A CONTRACT Competent parties Offer and acceptance Consideration Lawful purpose

IV. ADDITIONAL ELEMENTS FOR REAL ESTATE PURCHASE CONTRACTS Legal description Compliance with the Statute of Frauds Virginia contract law Does not invalidate oral contracts Prevents the enforcement of an oral contract Addresses enforceability

V. DISTINGUISHING FEATURES OF CONTRACTS Bilateral vs. unilateral Express vs. implied Executory vs. fully executed

VI. STATUS OF A CONTRACT VALID VOIDABLE VOID UNENFORCEABLE

VII. SPECIFIC CONSIDERATIONS Ratification Earnest money deposits Equitable title Contingencies and conditions Standard clauses Disclosures Disclaimers Personal property sale agreements Bills of sale

VIII. DISCHARGE OF CONTRACTS Performance Assignment Novation Anticipatory breach, breach, and legal remedies Rescission Termination

IX. ANCILLARY DOCUMENTS Addenda Amendments Parol evidence and the Rule Release of contract

THE “ABC’S” OF CONTRACT WRITING: AGREEING TO AGREE A’s: Agreements Amendments Addenda Affirmations

THE “ABC’S” (CONTINUED) B’s: Bona fide offers Bilateral features Bifurcated conditions But “what” if “not”

THE “ABC’S” (CONCLUDED) C’s: Contracts Contingencies Clauses Covenants Closings