Can seller break signed contract

Question

We (buyers) just went under contract on a piece of property in central Texas.  We were preparing to send over earnest money and option fee when we were told the sellers were having an issue on their end and may be breaking the contract (it had been 24 hours since all parties signed).  Then what happened, which I think is bizarre, the title company refused to send us wiring information or courier information so that we could send the money.  They said in light of the issue in the seller side, they were not going to continue with the title until it got resolved.  There were no issues on our side and we were not wanting to break the contract.  All is good now and whatever was going on is apparently resolved but we were quite surprised at all of this.  Can a seller break a contract once signed even if earnest money has not been collected yet (we had 4 days to get it to them and this was day 1) and can a title company halt the process?

Charlie MacPherson · Answer

@Heather Meyer [not legal advice]  It depends.  Assuming that you have a properly formed contract, the short answer is that they can refuse to perform, but there will be consequences.

Those consequences normally play out in court, so it's not normally worth the cost to pursue it.  If you do go that route, you sue for "specific performance", meaning that the court can order the defendant to fulfill the terms of the contract.

The question in this case goes to whether the contract was fully executed.  Aside of things like properly identifying parties, property, competence of the parties, mistake, fraud, meeting of the minds, etc, there are three essential elements required to form a binding contract:

Offer - one party offers to sell, lease, or otherwise transfer ownership of an item to a buyer.

Acceptance - the other party accepts the first party's offer. Verbal agreements are normally binding, if harder to prove.  However, the Statute of Frauds dictated that real estate contracts must be in writing.

Consideration - Something of value (usually money) changes hands to "bind" the contract.  However, even a promise can be considered to be that "something of value" as can the contract itself.  That means that the EMD itself doesn't necessarily have to be tendered in order to bind the contract.

There are a slew of reasons that a contract can be void, such as a contract formed for an illegal purpose, or voidable, meaning that one or both parties can declare the contract to be void, but they can also elect to see the contract through to completion.

I hope that helps!

Joe S. · Answer

You can still send the money to the title company. You can take them a check etc. As far as the title company goes they are somewhat of a neutral third-party in the sense that they are not going to force you to buy the property nor will they force the seller to sell the property. Why would they want to start the title work if they don’t think there will be a closing? As far as you allowing the seller to back out a contract that is a choice you would Need to decide if it was worth the hassle In fighting for your right to purchase the property.

Why were the sellers saying that they were having issues with on their side? Another words what was the issue?