At the core of contract law, you must have an offer that is accepted in exchange for consideration of some kind. That simple formula for creating a contract can get rather complicated at times. In this tip, we’ll highlight a few points that are worth focusing on to assist your practice. Oregon REALTORS® Forms are designed to help you comply with these contract principles, but these tips are important to remember as you fill in blanks or add additional provisions and addenda to your contracts:
- Advertisements are not offers, they are requests for others to make an offer to you. Corbin on Contracts, sec. 2.4 at 116 (Joseph M. Perillo ed., 1993 & Supp Spring 2002). This means that your listings and postings on the MLS are not actually “offers” in the classic sense. They are advertisements like a billboard on the side of the road.
- Parties need to accept the *exact* same terms to have a contract. Accepting only a portion of the terms, or adding a new term that was not in the original agreement is considered a counteroffer. Lang v. Oregon-Idaho Annual Conference, 21 P3d 1116 (Or. App. 2001). If you accept the other party’s offer but just need to add in a well addendum or a septic addendum that was not with the original offer; you’ve created a counteroffer even if by accident.
- An offer can specify a manner of acceptance, but if none is specified, any act or conduct that manifests intent is sufficient. Larson v. Trachsel, 577 P2d 928 (Or. 1978). This is why most forms will specify that acceptance requires both signature and delivery back to the other party before the deal is truly considered “accepted.” Oral acceptance is literally not sufficient.
Nominal consideration does not support a contract. A court can consider the adequacy of consideration and see if there is an indication of fraud, potentially invalidating the contract. Eldridge v. Johnston, 245 P2d 239 (Or. 1952). Hence, you cannot generally enter into a contract solely to trade $50 for $10 because that’s just fraudulently moving money. In the agency context, it is difficult to argue that a contract is formed when there is no exchange of consideration. If an agent agrees to just “show houses” to a client with no other expectations and no compensation, the agent is doing work for the client without any benefit. Absent other facts [e.g. agent has agreement from client saying client will give up a right by working with agent exclusively], the validity of the agency contract sans consideration is uncertain.
- Timely performance of any contract provision is not material by default, but must be made intentionally material through terms like “time is of the essence” provisions. Smith v. Piluso, 719 P2d 33 (Or. App. 1986). If there is no specification of the materiality of the expiration date or no specification of the materiality of something like an inspection period, failure to meet the deadline is not an offense that would support a termination. There’s only so far that you can credibly stretch a “time is of the essence” provision, so if a timeframe or timeline is critically important to your client, specify that the timely performance or timely acceptance is material to the transaction.