A contract is a legally binding agreement between two parties to do (or not do) something. People make (and break) contracts everyday. People generally only worry about contracts if the substance of the contract is important to them. Obviously, contracts for more substantial things are often treated with more precision, and rightfully so. Before entering into an contract, you may want to consult an attorney before agreeing to it.
There are four (five, in real estate) elements to a Florida contract
1. Contractual Capacity of the Parties
To be bound by a contract, a party must be competent (legal age, not insane, sober) to enter into the legal arrangement. Infants, the mentally ill, and intoxicated people usually are not bound by the contracts they enter. Even if a person has the legal capacity to enter into a contract, the use of coercion, fraud, or duress to get “consent” will likely make the contract voidable.
2. Offer and Acceptance / Meeting of the Minds / Mutual Assent
An Offer is good until one of the following:
Withdrawal of the Offer
Lapse of Time
Destruction of Property
Acceptance is the one that everyone likes, as it creates a meeting of the minds. If the person making the offer wants to revoke or withdraw an offer, that revocation is not effective until it is received by the the person receiving the offer).
The formation of a contract must include consideration. Consideration can be money, goods, services, the canceling of a debt, or an agreement not to do something, etc. All parties to an agreement must give consideration something valuable that distinguishes a contract from a gift.
4. Legality of Purpose
If either the subject matter or consideration of a contract is illegal, the contract is void as a matter of public policy. For example, a contract for the sale of illegal drugs is a void contract. Of course, many of those people use means other than the courts to enforce their contracts.
5. In writing and Signed
This is not necessary for every contract, but according to Florida law, contracts of $500 or more or promises that cannot be fulfilled within one year must be written to be valid. This is called the Statute of Frauds. In a written contract, the parol evidence rule prohibits the introduction of any agreements between the parties which conflict with the written contract and which were made prior to the contract in court.
Here are answers to some popular questions about contracts
- What is a Letter of Intent? (8/30/2013)
- How Does a Buyer Assign His or Her Rights in a Sales Contract to Another Party? (8/30/2013)
- Can I Rescind a Purchase of Real Estate After Foreclosure? (8/30/2013)
- Can a Buyer or Seller Sue the Other Party for Backing Out of a Contract? (8/30/2013)
- Can a Verbal Commitment Constitute a Valid Contract? (8/30/2013)
- What are the Contingencies to a Real Estate Deal? (8/30/2013)
- Contingencies in Contracts (7/9/2014)