Real Estate Contract Law Basics


Real estate law is the name given to the branch of civil law that covers rights to possess, use, and enjoy land and the permanent manmade additions attached to it. Real Estate

What is Real Estate?

Real estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing."


What is Real Estate Contract?

A real estate contract is a contract for the purchase or exchange of land and property between parties. The contract can cover a purchase, sale, lease, or rental. It can be between two or more parties and is typically in writing. The real estate contract follows normal contract law and legal requirements, and is sometimes known as a land contracts or as a contract for deed. Real estate contracts are typically bilateral contracts (i. e., agreed to by two parties) and should have the legal requirements specified by contract law in general and should also be in writing to be enforceable.


Real estate contract to be enforceable by law must:
  • Identify the parties: The full name of the parties must be on the contract. In a sales contract, the parties are the seller(s) and buyer(s) of the real estate, who are often called the principals to distinguish them from real estate agents, who are effectively their intermediaries and representatives in negotiation of the price. If there are any real estate agents brokering the sale, they are typically listed also as the real estate brokers/agents who would earn the commission from the sale.
  • Identify the real estate (property): At least the address, but preferably the legal description must be on the contract.
  • Identify the purchase price: The amount of the sales price or a reasonably ascertainable figure (an appraisal to be completed at a future date) must be on the contract.
  • Include signatures: A real estate contract must be entered into voluntarily (not by force), and must be signed by the parties, to be enforceable.
  • Have a legal purpose: The contract is void if it calls for illegal action.
  • Involve Competent parties: Mentally impaired, drugged persons, etc. cannot enter into a contract. Contracts in which at least one of the parties is a minor are voidable by the minor.
  • Reflect a meeting of the minds: Each side must be clear and agree as to the essential details, rights, and obligations of the contract.
  • Include Consideration: Consideration is something of value bargained for in exchange of the real estate. Money is the most common form of consideration, but other consideration of value, such as other property in exchange, or a promise to perform (i.e. a promise to pay) is also satisfactory.
As may be the case with other contracts, real estate contracts may be formed by one party making an offer and another party accepting the offer. To be enforceable, the offers and acceptances must be in writing and signed by the parties agreeing to the contract. 

A real estate contract typically does not convey or transfer ownership of real estate by itself. A different document called a deed is used to convey real estate. Deed is written instrument, which has been signed and delivered, by which one individual, the grantor, conveys title to real property to another individual, the grantee; a conveyance of land, tenements, or hereditaments, from one individual to another.

Contingencies are conditions which must be met if a contract is to be performed (e.g. mortgage).

Contingencies that suspend the contract until certain events occur are known as "suspensive conditions". Contingencies that cancel the contract if certain event occur are known as "resolutive conditions".

Most contracts of sale contain contingencies of some kind or another, because few people can afford to enter into a real estate purchase without them. But it is possible for a real estate contract not to have any contingencies.


A typical real estate contract specifies a date by which the closing must occur. The closing is the event in which the money (or other consideration) for the real estate is paid for and title (ownership) of the real estate is conveyed from the seller to the buyer. 

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