Contract Law Basics
The Purchase Agreement: Rules and Terms
Standard forms, who may prepare them, deadlines for delivering a signed copy, deposit handling rules and any mandatory attorney or rescission period are governed by state law and commission rule. This page covers principles that hold generally; anything procedural should be checked against your own state's statute and the forms your jurisdiction uses.
A purchase agreement is the document that obligates one party to sell and the other to buy on stated terms. Everything that follows it, from inspections to the deed itself, is performance of what this paper already promised.
Licensing exams return to it repeatedly because it sits where contract law meets a licensee's daily work. The items are rarely about drafting. They are about what makes the agreement enforceable, at what moment it becomes so, and what the standard vocabulary means.
What the Law Requires Before an Agreement Is Enforceable
Remove any one of these and the agreement is defective. Exam items usually present a fact pattern with a single element missing and ask what follows.
A meeting of the minds. One side proposes definite terms and the other accepts them as proposed. Acceptance that alters anything is not acceptance at all; it is a fresh proposal running the other direction.
Value moving both ways. Each side must give up something the law recognizes. In a sale the buyer promises money and the seller promises to convey. A bare promise to make a gift of land is not a contract.
Parties competent to be bound. Age of majority and sufficient mental capacity at signing. An agreement signed by someone under age is generally enforceable against the adult side only, which is the asymmetry exam items like to test.
A lawful object. The purpose may not be one the law forbids. An agreement whose object is illegal is treated as never having existed, and neither side can compel the other.
Assent that is genuine. Agreement obtained through deception, threat, exploitation of a position of trust, or a shared factual mistake is not assent, and the injured party may set the contract aside.
A signed writing. Under every state's version of the statute of frauds, an interest in land must be evidenced in writing signed by the party to be charged. An oral understanding to sell real property is generally not enforceable, however clearly both sides remember it.
A property identified with certainty. The writing must describe which parcel is being sold well enough that a court could tell. A legal description is the safe course; a street address may or may not suffice depending on the jurisdiction.
From Offer to Binding Agreement
An offer is a proposal made with present intent to be bound on terms specific enough to accept. Until it is accepted it obligates nobody, and the party who made it may generally withdraw it at any point before acceptance, even where a time limit was stated, unless the recipient paid separately for the right to keep it open.
The offer ends on its own in several ways besides withdrawal: the stated deadline passes, the recipient turns it down, either party dies or loses capacity, or the property is destroyed. Once an offer has ended for any of these reasons, nothing is left to accept.
Acceptance must mirror the offer and must be communicated. This is the step licensees are most often asked about, because a signature alone is not the finish line: until the acceptance is delivered back to the offering party in the manner the offer or the statute contemplates, there is no agreement. A seller who signs and then reconsiders before that delivery has generally not bound anyone.
A response that changes any term, including one the changing party considers minor, operates as a rejection and puts a new proposal on the table. The original terms are gone and the roles swap: the party who proposed first is now the one deciding. This is why a counter to a counter to a counter is ordinary in practice, and why each round must be tracked by date and time.
Multiple offers compound the risk. A seller who signs two of them has created two agreements to sell one parcel. The remedy for the disappointed buyer is a matter of state law, but the exposure is real, which is why the ordinary practice is to counter all but one and accept a single offer outright.
Four Words for Enforceability
Valid
Every required element is present, and both sides can be made to perform. This is the baseline against which the other three are defined.
Void
Never a contract at all, because something essential was absent from the start. An unlawful object is the standard illustration. Neither side can enforce it, and no act of ratification can rescue it.
Voidable
Enforceable unless and until the protected party elects to escape. The classic instances are a signature obtained by fraud or duress and a signature by someone under the age of majority. Only the protected side holds the option, and it may be given up by proceeding with the deal after the problem is known.
Unenforceable
Valid in substance, but a court will not enforce it. An agreement to convey land that was never reduced to writing is the usual example, as is one on which the limitations period has run out. The parties may still perform voluntarily.
Terms Inside the Agreement That Items Turn On
Conditions are the promises that must be satisfied before performance is owed. Financing, inspection, appraisal and the sale of a buyer's existing home are the common ones. Each carries a deadline, and what happens when a deadline passes without action, whether the condition falls away or the agreement ends, depends on how the form is written. Read the form; the answer is in it.
The good-faith deposit is not an element of formation. The agreement is enforceable without one, because the buyer's promise to pay is already the value it gives. In practice a deposit almost always accompanies an offer as evidence of seriousness, and its handling, who holds it, how fast it must be deposited, and what happens when the parties disagree about its release, is tightly regulated by state law and commission rule.
Time is another term worth precision. Where an agreement states that time is of the essence, a missed deadline is itself a breach rather than a delay to be worked out. Where it does not, courts generally allow a reasonable period.
Assignment and contingent parties round out the usual list. Whether a buyer may transfer its position to someone else depends on what the agreement says, and a clause naming a buyer's nominee or assignee changes who may ultimately close. Items on this topic reward reading the sentence in front of you rather than recalling a general rule.
Contract Questions Candidates Bring
How do void and voidable differ in practice?
A void agreement produces no rights for anyone and cannot be fixed by later agreement, because the defect goes to whether a contract ever existed. A voidable one is fully operative and stays that way unless the protected party acts to undo it. The distinction is who, if anyone, can enforce: nobody in the first case, and either side in the second until the protected party says otherwise.
Can an offer be accepted after the other side has countered it?
No, not unless it is put back on the table. A counter terminates the proposal it responds to. If the counter is then declined, the party who made the original proposal is free to restate it, but that is a new offer requiring fresh acceptance rather than a revival of the old one.
Is a deposit necessary for the agreement to be enforceable?
Not as a matter of contract law. The value each side gives is already present in the mutual promises. A deposit serves as evidence of commitment and as a fund the seller can look to if the buyer walks away without a contractual reason, which is why it is standard practice even though it is not a formation requirement.
Is an oral agreement to sell a house ever enforceable?
Generally not. The statute of frauds requires a signed writing for an interest in land, so an oral understanding is normally unenforceable even where both sides agree it was made. Some states recognize narrow exceptions where one party has substantially performed in reliance, but those are judicial doctrines that vary and are not something to rely on.
What happens when someone lacking capacity signs?
The agreement is typically voidable at the election of that party rather than void. Someone under the age of majority can usually disaffirm, while the adult on the other side remains bound and cannot use the age difference to escape. The same option generally exists where capacity was impaired at signing.
May a licensee fill in the blanks on a purchase form?
In many states a licensee may complete an approved standard form, while drafting new provisions or advising on legal consequences crosses into the practice of law. What is permitted, which forms may be used and when counsel must be involved are set by your state's statute and commission rule, so confirm the boundary locally rather than assuming a national answer.