. . . Real Estate Law Lecture Notes: Contracts . . . . ..
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General Features
of a Real Estate Contract:
Contract
Definition:
An agreement between two or more persons containing promises or mutual promises
respecting real estate, that the law will enforce as a duty.
(Requirements:
capable parties, mutual agreements, consideration, lawful purpose, in writing.)
1.
Capacity: Being legally accountable. The law will enforce the promise
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A
contract is voidable at the election of the minor. Minors are protected
from their promises, except for their promises for "necessaries."
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Adjudicated
incompetents are protected from their promises.
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A.
corporation's legal capacity to enter into a contract comes from its charter.
The charter or action of the Board of Directors will describe the capacity
and authority of any corporate agents. (Keep the Board resolutions with
the contract.)
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General
partnerships formed under Uniform Partnership Act have capacity to enter
into a real estate contract. Unless a designated managing partner has
been appointed, all partners must consent to a contract for the sale of
partnership property. The written partnership agreement will contain the
information.
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For
limited partnerships, the Uniform Limited Partnershp Act authorizes general
partners to act for the partnership. But the partnership agreement may
further limit authority. All limited partners must consent to sell real
estate.
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Executors
and administrators have power given by state law and/or the will. If a
decedent executed a contract before death, review the will/letters of
authority, etc., to see if the executor may act. Many states will require
a court order to permit sale of real estate, even with power contained
in the will. (Order will entail notice to the heir.
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A
trustee's power to enter into a real estate contract comes from state
law, and more importantly, the trust agreement. Need to review the agreement
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As
to agents, (those holding a power of attorney/attorney in fact) the document
giving the power must be executed with the same formalities as the state
requires to transfer title to real estate. The power should be recorded.
It can be revoked at any time, but death of the grantor is a termination
of the power.
2.
Mutual Agreement: Normal contract rules apply.
3. Consideration: Normal contract rules apply.
4. Lawful Purpose: Normal contract rules apply.
5. Written Agreements: Statute of Frauds. A real estate contract, in
writing, requires: names of the parties, a statement of agreement to buy and
sell, a description of the property, price, terms, (earnest money), closing
date, "time is of essence", conditions, signatures.
Remember
the theory of equitable sale by executing contract. Rights are created. Buyer
has equitable title; seller retains legal title until closing. Note also that
other rights are involved, as a right to claim a commission.
Words
and Phrases to Know:
voidable, Uniform Partnership Act, Power of Attorney
