Real Estate Contracts: Definition, Classification and Validity

Contracts are the backbone of transactions. Whether you are buying a home, selling a property, or signing a lease agreement, contracts are essential in establishing the terms and conditions of the negotiation. In this article, we will explore in detail the key concepts related to contracts in real estate, as used in the original language of the industry in the United States.

Contract Defined

A contract is an agreement between two or more parties who have reached an “agreement of minds” and have agreed to perform (or refrain from performing) some act. A valid contract is legally binding and meets certain requirements of contract law. If a contract does not meet these requirements, it is invalid and the parties cannot go to a court of law to enforce its provisions.

Contract Status

Contracts can have different statuses, including:

Valid (Valid): Complies with all legal requirements.

Valid but unenforceable: Some oral contracts may be valid but not enforceable; that is, if they are executed, they cannot change the legal result.

Null (Void): It is invalid and cannot be legally enforced.

Voidable: May be terminated due to subsequent discoveries; if executed, they cannot change the legal outcome.

Contract Validity


For a contract to be valid, it must meet certain requirements:

Competent Parties: The parties must be of legal age, mental capacity, and legitimate authority to enter into a contract.

Mutual Consent: There must be a clear offer and unequivocal acceptance with a common understanding between the parties.

Valuable Consideration: There must be an exchange of valuable consideration in exchange for performance on the part of the other party. “Love and affection” is not enough; It must be a real value.

Legal purpose: The purpose, intent and content of the contract must be legal; If it is illegal, the contract is void and cannot be entered into in violation of the law.

Voluntary and Good Faith (Voluntary, good faith): The contract must be entered into without duress, coercion, fraud or misrepresentation.

Conveyance Contract Requirements

When it comes to real estate transfer contracts, such as purchase and sale contracts, leases or financing agreements, there are specific requirements that must be met:

  • They must be in writing.
  • They must contain a legal description of the property involved.
  • They must be signed by one or more parties.

However, there is one important exception: under the Statute of Frauds, leases of one year or less can be oral and still be legally enforceable.

Offer / Counteroffer / Acceptance

  • Offer (Offer): It is a declaration of intention to enter into a contract. It must contain all the terms provided and, generally, must be in writing. The offer expires in a “reasonable time” or on the specified date and time.
  • Acceptance: It is an unequivocal and manifest agreement with the offer. There should be no changes to the offer. Ideally, it should be signed and preferably dated.
  • Completed Contract: It occurs when acceptance is communicated to the offeror. If communicated by mail, the offer is considered communicated when sent.
  • Counteroffer (Counteroffer): It involves new terms or amendments to an offer received. The original offer is void in this case.

Revoking an offer: It can be done at any time before the offeror communicates his acceptance.

Termination of an Offer: It may occur due to acceptance, rejection, revocation, expiration, counteroffer, death or insanity of either party.

Contract Assignment

In some cases, contracts may be assignable unless expressly prohibited or the contract is for personal services (such as real estate listings).

Contract Preparation

Preparation of contracts may be restricted unless you are licensed as an attorney or a party to the contract. Real estate agents should be aware of contract preparation restrictions in the states where they operate.

Contract Classifications

Contracts can be classified in several ways:

  • Oral vs. written (Oral vs. written): Oral contracts may not be legally enforceable in certain circumstances.
  • Express vs. implicit (Express vs. implied): The contracts Express contain all expressly agreed terms, while contracts implied They arise from actions or circumstances and are not established in writing.
  • Bilateral vs. unilateral (Bilateral vs. unilateral): Bilateral contracts involve promises by both parties to perform, while contracts unilateral require one party to comply only if the other party does so.
  • Executed vs. executable (Executed vs. executory): The contracts andxecuted have been fully fulfilled, while the contracts executory They still have pending actions.

Termination of Contracts (Termination)

Contracts may terminate due to a variety of causes, including performance, non-feasibility, mutual agreement, termination during the cooling off period, revocation, abandonment, expiration of time, invalidity of the contract or breach of the contract. contract.

  • performance
  • infeasibility
  • mutual agreement
  • cooling-period rescission
  • revocation
  • abandonment
  • time lapse
  • invalidity of contract
  • breach of contract

Breach & Remedies

In the event of a breach of contract, there are several possible remedies:

  • Termination (Rescission): Cancellation of the contract and return of deposits.Cancel contract; return deposits
  • Forfeiture: The defaulting party gives up something under the terms of the contract.                                                defaulting party gives up something according to contract terms 
  • Liquidated damages: Damages that an injured party can claim as set forth in the contract.Damages due to a damaged party as stated in contract
  • Suit for damages: Civil lawsuit for monetary damages that are not covered by the contract.                                                                                                                                                                                              Civil suit for money damages not covered by contract
  • Specific performance: Lawsuit to force a party to fulfill the promises of the contract.Suit to force party to fulfill contract promises

In summary, contracts play a critical role in the real estate industry in the United States, and understanding key concepts and requirements is essential to conducting successful transactions and protecting the rights of the parties involved. Whether you are buying, selling or leasing property, contracts are the foundation of these transactions and provide the legal structure necessary to ensure that agreements are followed.

Legal and Tax Disclaimer

Please be advised that the content presented in this blog is for informational purposes only and should not be construed as legal or tax advice. The articles and information provided here are written from the perspective of a real estate agent affiliated with Keller Williams, and do not represent legal or tax counsel.

As the author, I am a licensed real estate professional under Keller Williams, holding Brokerage DRE License Number: #02197031. However, it is important to note that my expertise is in the field of real estate, and not in legal or tax matters. The insights and opinions shared on this blog are based on my experiences and knowledge in the real estate industry and should be treated as general guidance rather than definitive legal or tax advice.

For specific legal or tax concerns relating to any real estate transactions or investments, readers are strongly encouraged to consult with a qualified attorney or tax advisor who can provide tailored advice based on your individual circumstances and the latest legal and regulatory requirements.

The information on this blog is provided "as is" without warranty of any kind, and I, along with Keller Williams and its affiliates, disclaim all liability for any loss, damage, or misunderstanding arising from reliance on the information contained herein.

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