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A contract is an agreement that outlines specifics details of an issue between different parties regarding a certain matter; it is usually a written document, although it can also be verbal and is enforceable in a court of law. For a contract to be considered valid, it must contain seven elements but only five of which are important: consideration, form, intention to create legal relations, agreement, genuine consent, and capacity to implement the contact.
When a contract has been broken, a breach is said to have occurred, breach of contract in legal terms is used to describe actions that have been undertaken by one of the parties in contravention to the binding agreement as originally agreed between the parties. It is also used to describe cases where the terms of an agreement as entered between various parties are not honored according to the articles of the agreement. In general, all forms of contracts reached upon between various parties are governed by the principle of pacta sunt servanda. The principle of pacta sunt served requires parties to an agreement to act and undertake obligations in good faith in accordance with the intention of the contract as originally written down.
In writing contracts for real estate, these are some of the most basic factors to consider, which must be observed when drafting the contract document. In the preceding section, we shall discuss in more detail the specific elements of each aspect of these factors that must be considered in the writing of contract agreements in the context of real estate.
Elements of a Contract
Ideally, all forms of contracts should be legally enforceable as long as such contracts are not illegal, trifling, indeterminate, or impossible to implement. A contract is an agreement that is intended to be enforceable in a court of law; as such, it must be drafted carefully to ensure that issues that might arise are easily clarified through the court of law. A contract can take two other forms besides agreements; it can be based on promise or on the legal relationship. In order to understand the elements of a contract agreement, it is important to understand the major reasons why a contract agreement is created in the place first place. Basically, contract agreements are crucial in all forms of business transactions that involve buying and selling goods and services. In the real estate business, the requirement to have a contract agreement during any form of transaction is even more important given the nature of the goods that are transacted in real estate, which are property and lands.
In fact, many country statutes make it mandatory for written contract agreements, especially that involve the sale of property and land to be in place between any parties transacting such business. Indeed, the importance of contracts in the real estate business is taken so seriously by the law such that it provides the circumstances under which the articles of a contract might not be fully enforced in what it refers to the Parol Evidence Rule (PER).
In the context of contract law, Parol evidence refers to all forms of non-pertinent evidence presented by any party to an agreement that is not explicitly cited or which cannot be inferred from a written contract as it was finally written and agreed between the parties. Normally, PER is taken to mean evidence that is presented in the form of verbal statements. However, it actually refers to any form of evidence written or verbal in nature that contradicts the terms of an agreement. For this reason, it is important for the parties involved to understand what the law says pertaining to the PER principle in order to ensure that all pertinent issues of the transactions are comprehensively addressed in the contract agreement.
Drafting a Contract Agreement
There are two basic steps that are involved in the drafting of a contract agreement between parties; the presence of an offer and acceptance. In simpler terms, there must be more than one party involved in the transaction, one of whom is making an offer on something which in this case is real estate property, while another party is a willing buyer of the property. During these steps, the important issue that one needs to consider is the legality of the transaction being transacted, whether the parties are of legal age and that the terms of offer and acceptance are clearly articulated in the document, among other factors. The next stage that is involved in drafting a contract is verifying that all the seven elements of legal contracts are present, as we have already discussed in the previous section.
The importance of this is to ensure that the contract agreement does not end up being invalidated or voided by a court of law in case of contention by any of the parties. In summary, valid contracts must have an element of what is referred to as “intention to create legal relations”; this implies, among other things, that a contract agreement cannot be based on coercion or fraud. The second element regards consideration; this means that a contract should clearly indicate the elements of benefits and promises that exist for both parties in the transaction. For formal contracts such as the ones that are drafted for real estate, the element of consideration would not be mandatory since they are considered to be the type of deeds by their nature. By statutes, most countries make it mandatory for a contract that involves transaction business in real estate to be “evidenced by writing,” where the parties are required to append their signatures on the contracts document observed by a witness.
The third element, which is the capacity to contract, requires that parties in a contract agreeing not to be any of the following; minors, persons of an unstable mind, intoxicated persons, sometimes aliens persons, among others. Four, a contract must be legally enforceable and must have defined articles regardless of whether it is written or oral. It is important to note that the court assumes that any evidence presented and which is not supported by the articles of an agreement must be for purposes of altering the intention of the contract since they are not contained in the agreement.
At the same time, the court must take into account all circumstances that existed in the drafting of the contract; in order to address both of these challenges, the law relies on the principle of the Parol Evidence Rule.
Parol Evidence refers to verbal statements made as evidence in a court of law for purposes of influencing a verdict. In the context of contract law, Parol evidence refers to all forms of non-pertinent evidence presented by any party to an agreement that is not explicitly cited or which cannot be inferred from a written contract as it was finally written and agreed between the parties. Normally, PER is taken to mean evidence that is presented in the form of verbal statements. However, it actually refers to any form of evidence written or verbal in nature that contradicts the terms of an agreement. This means that a court of law will classify all evidence presented by any party to an agreement that contradicts the original articles of the contract as Parol Evidence that is subject to dismissal unless otherwise. To avoid the court from applying the principle of PER, it is important that all the details of the transaction be comprehensively captured in the contract agreement articles.
Finally, the fifth element that should be observed when drafting a contract requires one to ensure that the contract has no vitiating element. This refers to any characteristics of the contract that can render it in the eyes of the court as unenforceable, void, or unavoidable.
Some of the factors that can make a contract to have vitiating characteristics include duress, errors, misrepresentation, undue influence, illegality, or nonest factum.
In conclusion, the idea of a contract agreement is to incorporate the vested interest of all parties concerned in a single document, which they all must be in agreement before it is signed. For less complicated and straightforward agreements, this process is much simpler and faster, but for contracts involving business transactions in real estate, the formulation of contract documents cannot be simplified and must be carefully drafted.
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