A contract is a legal agreement between multiple parties that states actions they’ll take or refrain from during a stated period. After the agreement, this is enforceable by law. There are legal and monetary consequences of breaking them for all parties involved. Most contracts are written, as oral agreements are hard to prove.

Below are things you should remember when making a contract, as well as what to look out for when a contract is broken.

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To make a proper contract that can be legally enforced when necessary, all parties must meet certain requirements. If any of these requirements aren’t met – the chances of the contract being legally enforceable and the settlement one can receive in court in case of legal action will greatly vary.

These 7 requirements are:

• Legality: The country or state has a great impact on any contract as they’ll be the one enforcing it when one of the parties tries to back down. So, the contract must be legal according to the laws of that state
• Capacity: All the parties involved must be of legal age and fully fit to understand and accept the terms. This means no mentally unfit person can participate. Agreements while intoxicated or unconscious won’t count as well
• Offer: The contract needs to be a clear and detailed proposal where both the parties understand that they’ll be legally bound to follow this once they agree to it. The offer should present the terms, costs, obligations, nature, goals, etc. And these should be clear and explicit.
• Consideration: To be a proper contract, a clear benefit for both the parties must be present. This is generally money. However, it can also be assets, properties, or items. If there’s no consideration present, then the agreement was being completed voluntarily, and no legal actions can be taken in case they back out
• Acceptance: Lastly, it’s evident that both parties have to agree to the contract. Usually, the signature works as proof of this

Whether you’re selling or renting properties, always have a contract in place while doing real estate work. It’ll protect both parties when needed. There are two types of contracts related to real estate you might participate in:

Buyer-Seller Contracts

When buying and selling properties, it’s a must to have a contract specifying everything so no misunderstandings and changes can occur.

The contract should properly mention:

• Price: The price decided on for the trade
• Riders: A document addressing additional details, conditions, or terms of a contract
• Contingencies: Requirements that need to be checked before the closing. For example, the buyer getting a loan or selling his current home, the repair of all issues found during the house inspection, completion of value appraisal, etc.
• Earnest Money: The payment made to show the seller good faith during the signing of the contract
• Deed Of Trust: This allows the trading parties to transfer the property to a neutral third-party trustee till the debts have been cleared
• Mortgage Note: This states all the terms such as the down payment amount, payment periods, interest rates, the total amount, etc.
• Closing Costs: These are the additional fees required to complete the trade. Other than the purchase price, there are also escrow fees, title search fees, title insurance, recording fees, notary fees, transfer tax, etc.
• Seller Assist: If the seller of the property will take some of the closing costs
• Considerations: Anything of value including money, property in exchange, or a promise to perform in exchange for the transaction

Whether you’re a landlord or a tenant, you should always make sure that a real estate contract is in place. This will protect both parties as well as the property.

The contract should mention:

• Property And Contact Details: The contract should include the address and location of the property, both the landlord and tenant’s name and contact details, a marked inventory list, etc.
• Length Of Contract: It should also contain the length of the tenancy period, if it’ll automatically renew or not, how much time will be given to the tenant at the end of the tenancy, and the responsibilities of the landlord and the tenant
• Rent And Other Payments: The contract should specify the rent amount, the frequency, and any additional payments the tenant has to make
• Deposit: The amount of the deposit, when the landlord can take charges from it, when the tenant can have it back, the scheme being used to protect it should be properly mentioned
• Repair Information: What repairs are for the landlord and what type of repairs are for the tenant should be stated in the contract
• The Landlord’s Rights: How much notice must the landlord give before a visit
• Use Of The Property: These include if the tenant can bring guests, pets, and decorate the property or not

A breach of contract is when either party fails to or deliberately doesn’t follow the contract. Whether you’re the breacher or plan to take against someone who is – you should know about the 4 types of contract breaches so you can seek the proper legal action.

The 4 types of violations that might happen are:

• Minor Breach: A minor breach (aka partial breach) happens when one party doesn’t comply with a part of the contract. Aside from this one violation, they follow everything else. For example, if a tenant pays the rent on the second week of the month, they have still paid – however, if the contract stated that rent must be paid on the first of the month – this would be a minor breach.If the landlord can prove how they have been damaged through this, they can demand compensation and sue.
• Material Breach: A material breach occurs when one party gets something greatly different from what was mentioned in the contract. So significantly different that the non-breaching party suffers greatly or can’t make do with it at all – essentially destroying the very purpose of the contract.For example, the breaching party failed to close a real estate transaction on time, where the contract specifically stated “time is of the essence.” In most cases, the non-breaching party no longer needs to follow his end of the contract and has a right to compensation.
• Actual Breach: This breach is true to its name. A breach where one of the parties refuses to complete their side of the deal or complete it within due time. The damaged party can seek damages in court.
• Anticipatory Breach: While an actual breach deals with the refusal to complete the contract, an anticipatory breach is where one party finds it evident that the other party doesn’t intend to hold up their end of the contract.

Oftentimes, anticipatory breaches happen, when a contractor doesn’t begin their work on the expected time, you can then guess that he doesn’t intend to complete it by the specified date. In these cases, the anticipator can terminate the contract and sue for damages.

Having a clear and correct contract will help you and the parties involved get the proper protection needed. So, having an experienced lawyer while making, signing, and retaliating against breaches is absolutely necessary.

Get in touch with us to find out more and how we can help you!