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RE05RC12
RE05RC12 - CONTRACT LAW
Constantly Evolving Continuing Educationwith Kate Lanagan MacGregor
508-728-3648
Today’s Reality
❏ Multiple Offer
Situations
Today’s Reality
❏ Scarcity of Listings
Today’s Reality
❏ Contract Details
Important
Today’s Reality
❏ Agency Challenges
❏ Cooperation
❏ COE Adherence
Today’s Reality
❏ Breakthrough
Companies
Today’s Reality
❏ Disruptors
Today’s ObjectiveAs a result of today’s class we will be able to:❏ Identify the elements of a contract❏ Understand why we need binding contracts
as soon as possible❏ Learn how to utilize our free benefit zipForms❏ Discover how to go to tutorials and learn
more at any time❏ Become familiar with eSign, and be prepared
to ❏ GO PAPERLESS- GO GREEN!
POLL!
❏ Who has had experience of losing a transaction due to your contract not being properly executed?
❏ Please type in chat box your story!
❏ We learn from stories!
WHY?
❏ Why do WE need to know this all?
❏ What is our job?
❏ Who do we work for?
What is a Contract?A contract is a voluntary, legally
enforceable promise between two
competent to perform (or not to
perform) parties some legal act in
exchange for consideration.
Elements of a Contract
❏ Voluntary agreement or promise
❏ Parties to the Contract are
identified
❏ Requirement of competency
of parties
❏ -age
❏ -competent
Elements of a Contract
❏ Must be for legal purposes
❏ Consideration (or recital of consideration?)
❏ How Do You Interpret This?
❏ Offer and Acceptance (required)
❏ In Writing?
❏ Statute of Frauds
❏ Attorney advice
The Mailbox Rule
❏ The term “mailbox rule” is typically found in contract law, and it concerns the acceptance of a contract that is received by mail, fax, or email.
❏ Acceptance of the offer must be communicated in a timely fashion, and before the expiration date of the offer.
❏ Acceptance may also be considered effective at the time the acceptance letter is personally delivered, if that is an accepted method, according to the parties. The mailbox rule is an exception to the general idea that a contract takes shape the moment the offeree agrees to the contract in a face-to-face meeting.
❏ Applying the Mailbox Rule to Email Communications
❏ When applying the mailbox rule to email communications, there is no difference between sending an acceptance letter via “snail mail” and sending it via email.
❏ The end result is the same: the acceptance letter must be marked and served timely and correctly.
❏ The key here is documentation of the date and time the acceptance was sent – whether by a postmark, or by a sent receipt from a fax or email.
Contract Specifics
❏ Executed vs. Executory
❏ Equitable Title (Equitable Conversion) vs.
Legal Title
❏ Statute of Limitations
❏ Laches (unreasonable delay in making an assertion or claim, such
as asserting a right, claiming a privilege, or making an application for redress, which may result in refusal.)
Validity of Contracts❏ Valid
❏ Void
❏ Voidable
❏ Unenforceable
❏ Offer contracts❏ Letter of Intent (LOI)❏ Listing Agreements❏ Buyer Representation❏ Contracts/Agreement
Contracts used by real estate licensees?
❏ Purchase and Sale Contracts❏ Options❏ Residential Leases❏ Commercial Leases❏ Contracts for a Deed
Contracts used by real estate licensees?
❏ NOTE: Massachusetts Mandatory Licensee-Consumer Relationship Disclosure form is NOT a contract.
Contract for purchase/sale of real property
❏ in writing to be enforceable
❏ Verbal agreement greater than one year not
enforceable
❏ A Will or Devise transferring property must be
in writing
❏ Sale of personal property in excess of $500
(UCC 2 201)
Statute of Frauds – M.G.L. c. 259
Minimal Requirements of a Contract
1. In writing
2. Must identify the parties
3. Accurate description of property
4. Recital of consideration
5.Must be signed by the party to be charged
Rescission of ContractBasis for rescission
1. Misrepresentation
2. Fraud
3. Undue influence or duress
Do brokers sign purchase and lease contracts? (Maybe)
Key Terms to Identify❏ Parties❏ Dates❏ Legal description of property❏ Purchase & Sale Agreement❏ Contingencies❏ Price❏ Earnest money❏ Terms
Types of Contracts❏ Express – the parties state their terms
and show their intentions in words❏ Written❏ Oral
Implied – the agreement of the parties is demonstrated by their:
❏ Acts❏ Conduct
❏ Bilateral- BOTH
❏ Unilateral- ONE
❏ Executed-DONE
❏ Executory-IN THE PROCESS
Types of Agreements
Acknowledgements (Notary)
❏ Identity of party
❏ Free and willing act
❏ Admissibility in court
LAWYER UP?❏ Use of Lawyers
❏ Role of attorney
❏ Legal advice
❏ Drafting contracts by licensees
❏ Relationship between lawyers and
licensees
“Time is of the Essence”
Failure to act within the time required constitutes
a breach of the contract.
No Time is of The Essence?
❏ The general rule is that time is not of the
essence unless the contract expressly so
provides.
What Does This Mean for Us?
❏ When time is not of the essence, courts
generally permit parties to perform their
obligations within a reasonable time.
Poll Question~
❏ Do you or does your attorney include or omit
this in your contracts and addenda?
❏ How do YOU explain to your consumer
Contract to Purchase❏ zipForm MAR Contract to Purchase
❏ Counter- YOU HAVE NOTHING
❏ Signed Offer is Binding
Types of Offers
❏ Back-up -
❏ CANNOT ACCEPT 2 OFFERS
❏ Multiple offers
❏ Disclosure?
❏ Letter of Intent
New Curve Ball● Escalation Clause
Example
**In the event Seller receives another competing offer(s) from a qualified Buyer with terms acceptable to the Seller, and from which Seller would realize a higher net sales price (contract sales price less points to be paid by Seller and other Seller concessions) then Buyer hereby increases their offer by the amount necessary to give the Seller a net sale price that is $1,000 above the net sales price in the competing offer, not to exceed a maximum contract sales price of $265,000.
Evidence
**Should this escalation provision be invoked, Seller shall attach to this Addendum evidence of competing offers without which, at the option of the Buyer, this Escalation Addendum is void and of no effect and the original offer will be valid.
Case Study
An agent listed a house, with a “all offers must be in by” clause in the listing
❏ 2 buyers asked the sellers agent to write an offer as a “Customer”
❏ She wrote both offers, attaching an escalation clause to both.
Deadlines
❏ The offers had deadlines❏ The Escalation Clauses had
deadlines and “not to exceed” clauses
Buyer #1 Selected!
At the end of the time allotted for the offers, the sellers selected one and negotiated with them.
❏ They verbally agreed❏ She sent that buyer a new offer to
sign
… but wait!
The offer had not been signed by the seller yet.
❏ It was after the multiple offer deadline and escalation deadline
❏ The deposit check was deposited
… Here comes Buyer #2
Buyer #2 comes back with higher offer, and the seller accepts.
The agent informs Buyer #1 that he is not the ‘winner’ anymore.
What would you do?
Common Additions/Provisions
“Appraise at or above sale price”
Does your buyer understand market prices increasing and how it relates to appraisals?
“In the event property does not appraise both parties will have the opportunity to renegotiate said price.”
Types of Offers❏Case interpretation
❏ McCarthy v. Tobin
❏ Supreme Judicial Court suggested
language ❏ “If parties do not intend to be bound by a preliminary agreement until
the execution of a more formal document, they should employ
language such as that”
❏ A right (buy or lease)
❏ Consideration
❏ Option expiration date
❏ Optionee right of sale
❏ Purchase & Sale Agreement (more
detailed contract)
Options
Clearly Identify P. and S.1. Parties (identification of buyer and seller)
2. Legal description of property
3. Consideration including schedule of payments
4. Time for performance and possession
5. Earnest money (down payment)
6. Type of Title Deed (possible covenants and restrictions)
7. Adjustments (proration of taxes, utilities, fuel, insurance etc.)8. Casualty loss9. Default provisions
a. Opportunity for cureb. Liquidated damages (Must be reasonable)c. Specific performance
10. Contingency clauses including inspections
P and S
11. Brokerage – identity and commissions12. Provisions for title evidence13. Identification and appointment of closing agent14. Provision regarding damage or destruction to property15. Identify personal property, if any16. Right of assignment17. Construction of agreement18. Dates and signatures
P and S Details
Contract Date? Poll question!What do you write on the front page of P and S, and when?
❏ Performance of the contract❏ Expiration of the time for
performance❏ Partial performance with written
acceptance by other party❏ Substantial performance❏ Impossibility of performance
Termination
❏ Rescission❏ By mutual agreement❏ Unilateral❏ Operation of law❏ Breach of contract
Termination
❏ Specific performance
❏ Liquidated damages
❏ Injunction
❏ Rescission
❏ Lis Pendens
❏ Vendor/vendors lien
❏ Monetary damages
Remedies for BREACH
❏ Arbitration or Mediation
❏ Massachusetts ADR law
❏ M.G.L. c. 251
❏ Must be agreed by both parties in contract
❏ Provisions of arbitration or mediation
❏ Courts must uphold
Alternative Dispute Resolution
❏ REALTOR Code of Ethics
❏ Ombudsman Program
Alternative Dispute Resolution
❏ Federal law - Electronic Signatures in
Global and National Commerce Act
❏ Massachusetts law - Uniform Electronic
Transactions Act (UETA)
❏ Electronic signature same as paper
Electronic Signatures
No E-Sign for these docsOnly few cases where electronic
signature not accepted:
1. Wills, codicils
2. Certain adoption and divorce matters
3. Some service terminations
4. Specific court documents
5. Deed-Admissible in court
Let’s Get ‘Zippy’!
❏Get out Smart Phone❏Download zipform app (app store)❏Log in/sign in❏Go to Support in Tool Bar❏Notice How To Videos❏Notice Live Online Training❏Go to Documentation❏Follow along with me
Hands On Exercise
Investigate your Options!
Written Help is Called “Documentation”
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WHY?!
Nice Meeting YOU! Volunteer2018 President RASEMMember- Professional Standards, Forms, Govt Affairs, Finance MARDean- Leadership Academy 20162018 RASEM REALTOR Of The YearEducator-TrainerInstructor Training InstituteCertified Distance Educator InstituteOwner/Instructor- Agent Rising Presenter/Trainer - MAR, NEAR, RASEM,RAPV,NARCertificate - 4Mat Online Instructional Design-Learning Styles
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