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The Power of Real Estate

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Module 4, Lesson 2
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2: Validity and Enforceability of Contracts in Real Estate Deals

Wilson Mercy December 29, 2023
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Explanation of Validity and Enforceability of Contracts in Real Estate Deals
In real estate deals, it is crucial to understand the validity and enforceability of contracts. This lesson will explain the four ways to determine if a contract is valid and enforceable, as well as how a counteroffer can nullify the original offer and create a new contract.

Determining Validity and Enforceability

  1. Offer and Acceptance: An offer is made when one party expresses their intention to enter into a contract with another party. The offer must be clear, definite, and communicated to the offeree. The offeree then accepts the offer without making any changes to its terms. This mutual agreement between the offeror and the offeree creates a legally binding contract.
  2. Consideration: Consideration refers to something of value that is exchanged between the parties involved in the contract. It can be money, property, services, or even a promise to do or not do something. Both parties must provide consideration for the contract to be valid. Without consideration, the contract lacks the necessary element of exchange.
  3. Legal Capacity: For a contract to be valid, both parties must have the legal capacity to enter into the agreement. This means that they must be of legal age, mentally competent, and not under the influence of drugs or alcohol. If one party lacks legal capacity, the contract may be deemed void or voidable.
  4. Legal Purpose: A contract must have a legal purpose to be enforceable. This means that the agreement cannot involve illegal activities or go against public policy. Contracts that are illegal or against public policy are considered void and unenforceable by the courts.

Counteroffers and Contract Creation
A counteroffer occurs when the offeree changes the terms of the original offer, effectively rejecting it and presenting a new offer. This counteroffer nullifies the original offer and creates a new contract. Let’s explore how this process works:

  1. The offeree receives the original offer from the offeror.
  2. Instead of accepting the offer as is, the offeree proposes changes to the terms, creating a counteroffer.
  3. The counteroffer makes the original offer null and void, as the offeree becomes the offeror.
  4. The right to accept the counteroffer now passes to a new offeree.
  5. If the counteroffer is accepted by the new offeree, a legally binding contract is formed, provided all other conditions are met

Key Takeaway
Understanding the validity and enforceability of contracts in real estate deals is crucial for creating binding agreements.
Action Steps
To ensure the validity and enforceability of contracts in real estate deals, parties should clearly communicate their offers, provide consideration, ensure legal capacity, and ensure the contract has a legal purpose.