Real Property Contracts

Contracts are the basis of buying and selling real estate.

A contract is a legal document that affects the buyer, seller, brokers, and every other person involved in a real estate transaction. The contract in a real estate transaction can prevent problems or cause disputes.

If the following basic contract law principles are applied, each transaction will proceed more smoothly, with fewer disputes and less liability for the parties and brokers involved.

General Contract Requirements (excerpted text follows)
For a valid contract to exist there must be an offer, acceptance, consideration and sufficient specificity so that the obligations involved can be ascertained. K-Line Builders, Inc. v. First Federal Sav. and Loan Ass’n., 139 Ariz. 209, 677 P.2d 1317 (App. 1983)

Statute of Frauds
A contract for the sale of real property must be in writing and signed by the party to be charged to be enforceable. A.R.S. §44-101(6)

All material modifications and amendments to a contract covered by the Statute of Frauds must also be evidenced by a signed writing. Best v. Edwards, 217 Ariz. 497, 176 P.3d 695 (App. 2008)

Both husband and wife must sign a real estate contract for the community property to be obligated. See A.R.S. §25-214(C)(1).

A.R.S. §33-452 states, “a conveyance or encumbrance of community property is not valid unless executed and acknowledged by both husband and wife. . .”

Therefore, both husband and wife must sign all contracts and other agreements relating to the transfer of real property, including modifications of the contract.

Since signing by both spouses is required in any transaction for the sale of community property, a contract signed by one spouse is not enforceable against the nonsigning spouse. See Geronimo Hotel and Lodge v. Putzi, 151 Ariz. 477, 728, P.2d 1227 (1986).

However, depending on the circumstances, the signing spouse’s sole and separate property may be held liable for any breach of the contract. Id.

An “offer” is an expression of a willingness to enter into an agreement, so made as to justify another person to believe that assent to the offer will conclude it. K-Line Builders, Inc., 139 Ariz. 209, 677 P.2d 1317 (App. 1983).

In other words, an offer creates a power of acceptance, permitting the offeree to transform the offer into a contract.

When an offer or counter offer is not supported by independent consideration, it may be withdrawn at any time prior to its acceptance. Bevins v. Dickson Electronic Corp., 16 Ariz. App. 105, 491 P.2d 494 (1971); Patton v. Paradise Hills Shopping Center, Inc., 4 Ariz. App. 11, 18, 417 P.2d 382 (1966); Butler v. Wehrley, 5 Ariz. App. 228, 425 P.2d 130 (1967).

Any statement clearly implying an unwillingness to enter into a contract according to the terms of the offer, communicated to the offeree prior to unequivocal and unconditional acceptance of the offer, is sufficient to withdraw an offer and prevent contract formation.

Although formal notice that the offer is withdrawn is not necessary, written confirmation is advisable. See Butler, 5 Ariz. App at 232, 425 P.2d 130.

“Acceptance” is a manifestation of assent to terms of an offer in the manner invited or required by offer. K-Line Builders, Inc., 139 Ariz. 209, 677 P.2d 1317 (App. 1983). Acceptance of an offer must be conveyed to be effective. Id.; Empire Machinery v. Litton Business Tel. Systems, 115 Ariz. 568, 573, 566 P.2d 1044 (1977).

Acceptance of an offer must be in the exact terms as the offer, and any attempt to accept in terms materially different from the original offer constitutes a counter offer, which rejects the offer.

Although consideration is necessary to a valid contract, consideration is easily demonstrated.
Consideration need not be money, but may involve a promise for a promise. Carroll v. Lee, 148 Ariz. 10, 13, 712 P.2d 923 (1986).

Sufficient Specificity
The contract contains all of the parties’ legal rights and obligations regarding the transaction. Therefore, the contract must be clear and contain all of the material terms of the transaction. All critical provisions must be specified and agreed upon. Savoca Masonry Co. Inc. v. Homes and Son Construction Company, Inc., 112 Ariz. 392, 542 P.2d 817 (1975)

The identity of the buyer and seller should be set forth with specificity.

If either party is a corporation, limited liability company or partnership, all pertinent information about the entity should be included, such as the entity’s name, address and state of formation.

If either party is an entity, the signer’s authority to bind the entity should be ascertained. Also, check with the title company for their closing requirements, which may include a certificate of good standing, corporate resolution or other related documentation.

Lind, K. Michelle. Arizona Real Estate: A Professional’s Guide to Law and Practice – Third Edition
Xulon Press (Kindle Locations 2968-3096)

©2018 by K. Michelle Lind, Esq./Arizona REALTORS®

This post is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.

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