By: Miriam J. Baer, Deputy Legal Counsel
Have you ever been involved in a real estate transaction in which you were not certain whether the parties had a binding contract? Perhaps the buyer and seller had reached an oral agreement when another buyer made an offer on the property. Maybe one of the parties got "cold feet" and wanted to back out of the deal even after signing the contract. To determine whether parties have an enforceable contract, you must be familiar with two basic concepts of contract law: the Statute of Frauds and the concept of acceptance. The Statute of Frauds
Every state has a law known as the "Statute of Frauds," which requires certain contracts to be in writing in order to be enforceable. Included in the North Carolina Statute of Frauds are certain long-term leases and all contracts for the sale of land or any interest in land. To be enforceable, these leases and contracts must also be "signed by the party to be charged"; i.e., the person against whom you want to enforce the contract. So, if one party has not signed a purchase contract, and has only orally agreed to its terms, he or she may not be held to the agreement. This means that if a buyer makes a written, signed offer to which a seller has only orally agreed, the agreement is not enforceable. If the seller receives a second offer, he is free to accept it. The Concept of Acceptance
The second important concept in determining whether you have an enforceable contract is that of "acceptance. " Along with "offer" and "consideration, " "acceptance" is required in every contract between two or more parties in order for the contract to be legally valid. Generally, it is easy to determine when you have an "offer" in a real estate transaction. In North Carolina, a buyer usually makes the initial offer in writing, (often on the standard Offer to Purchase and Contract form), signs the offer and presents it to the seller or the seller's agent. Likewise, "consideration" - something of value...
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