Purchase Agreement / Chapter 14

Purchase Agreement

Buyers promises to buy and seller promises to sell on specific price and terms.

• It is a bilateral contract.

Parties of Purchase Agreement

• Offeror

• Offeree

Offeror

The person making the offer.

Offeree

The person receiving the offer.

Counteroffer

Anytime you change something in the original contract.

• This will void the original offer and starts a new offer.

• Positions change → offer to offeror and offeror to offeree.

Vendor/Vendee

What the buyer and seller become once you have a full executed and delivered purchase agreement.

Equitable Title/Equitable Interest

Interest that goes to the buyer once you have an executed and delivered purchase agreement.

• Purchase agreement is binding on both seller and buyer estate even if the seller dies.

• Because of this interest risk of less, in contract law, will go to the buyer. Unless the state has a law that states differently.

Uniform Vendor/Purchaser Risk Act

If the state has this law, then the risk of loss will stay with the seller, until possession or deed are conveyed.

Legal Requirements of Purchase Agreement

CCLOMP

C - Purchase Agreement

Consideration → a promise.

C(2) - Purchase Agreement

Competent parties → legal age and sound mind, (the only one that makes the contract voidable, everything else is void).

L - Purchase Agreement

Lawful objective.

O - Purchase Agreement

Offer, acceptance, and delivery → to make it binding.

M - Purchase Agreement

Mutual consent → meeting of the minds on all terms.

P - Purchase Agreement

Proper form → ensuring everything is defined in the contract directly.

Proper Form of Purchase Agreement (5)

• Identify the parties.

• Accurate description.

• Effective date → last date everyone agrees to everything.

• Specific terms and conditions.

• Signatures from both parties.

Things Not Required in Purchase Agreement

• Does NOT require earnest money deposit (EMD).

• Does NOT require a closing date.

• Does NOT require a bottom line.

Breach By The Buyer

Permits the seller to terminate the contract.

Breach By Buyer Remedies

1. Seller can sue the buyer for specific performance.

2. Seller can sue the buyer for damages.

3. Seller can keep the earnest money → broker cannot disperse the earnest money without mutual agreement or court decision.

4. Seller can forget the whole thing.

Brokers Commission (Buyer Breach)

If the buyer defaults, the listing broker did not fulfill their services and no commission is paid.

Breach By The Seller

Permits the buyer to terminate the contract.

Breach By Seller Remedies

1. The buyer can sue the seller for specific performance.

2. The buyer can sue the seller for damages.

3. The buyer can get earnest money back.

4. The buyer can forget the whole thing.

Abandoned Money

Reverts to the state → escheat.

Brokers Commission (Seller Breach)

If the seller defaults, the broker is entitled to the commission.

Lien

A monetary claim on property that is collateral for debt owed.

Suit for Specific Performance

A court order that compels the parties to complete the contract → its not for money.

Judgment

A court order when a person or business that owe a debt.

Interpleader Action

The broker can ask the courts to step in and take over the money.