Is Your Contract Valid?
In a real estate environment where we have a contract for just about any scenario you can come across, it's important to take a step back and recognize whether or not our contracts are valid. While a vast majority could stand up in a court of law, not all contracts between parties are actually valid.
So, what makes a contract valid?
There are four basic requirements that a contract must have to make it valid.
1. Each party to the contract must have legal capacity to enter into the contract.
This means each person must be at least 18 years old (or the minimum age of majority in any state) and mentally competent. If either of these conditions are not met, your contract could very well be void or voidable.
2. There must mutual consent to the stated contract terms.
Cases of fraud of duress can make the contract invalid, because one or more parties were not free to consent. Also, whenever you counteroffer, the previous contract suddenly becomes invalid and the counteroffer replaces that offer automatically. Having an expiration date pass without mutual consent also makes a contract invalid.
3.The contract must have a lawful objective.
Any illegal terms in the contract make the contract invalid. This is a straightforward requirement, but important to keep in mind.
4. The contract must be supported by some kind of consideration.
Consideration must be something of value. Usually, in real estate, cash is the main consideration. However, consideration doesn't have to be money. Cars, boats, stamp collections, etc. can all be consideration. Whatever it is, make sure it is stipulated in the contract.
We depend on contracts to uphold the promises we keep and those we expect others to keep. Any contract should obviously be read and approved by an attorney you trust before executing it. Making sure your contract meets basic validity requirements is the first step to a solid transaction.
Sincerely,
Elsie L Huxtable
So, what makes a contract valid?
There are four basic requirements that a contract must have to make it valid.
1. Each party to the contract must have legal capacity to enter into the contract.
This means each person must be at least 18 years old (or the minimum age of majority in any state) and mentally competent. If either of these conditions are not met, your contract could very well be void or voidable.
2. There must mutual consent to the stated contract terms.
Cases of fraud of duress can make the contract invalid, because one or more parties were not free to consent. Also, whenever you counteroffer, the previous contract suddenly becomes invalid and the counteroffer replaces that offer automatically. Having an expiration date pass without mutual consent also makes a contract invalid.
3.The contract must have a lawful objective.
Any illegal terms in the contract make the contract invalid. This is a straightforward requirement, but important to keep in mind.
4. The contract must be supported by some kind of consideration.
Consideration must be something of value. Usually, in real estate, cash is the main consideration. However, consideration doesn't have to be money. Cars, boats, stamp collections, etc. can all be consideration. Whatever it is, make sure it is stipulated in the contract.
We depend on contracts to uphold the promises we keep and those we expect others to keep. Any contract should obviously be read and approved by an attorney you trust before executing it. Making sure your contract meets basic validity requirements is the first step to a solid transaction.
Sincerely,
Elsie L Huxtable
Comments (3)
those are the three that we use as well. I can't tell you how often we have had this question come up in 9 years. Great post!
Kevin Kaczmarek, over 13 years ago
Yup...I agree with Charles. The consideration is a requirement for a bargained-for exchange so that the agreement cannot be considered a gift.
Bryan Hancock, over 13 years ago
These are very basic requirements that have legal interpretations that can be less clear to the uninformed. Thanks for a great primer on contracts. There are three elements as I remember to any contract, an offer, an acceptance and adequate consideration.
Account Closed, over 13 years ago