Contract Formation is the most important step in a real estate transaction. Notwithstanding its importance, or maybe because of it, the formation of real estate contracts is fraught with uncertainty, myth and superstition. Some of that uncertainty, myth and superstition is the result of the legal complexities of contract law. More, however, is the result of human nature.
Contract formation requires “mutual assent” – a deceptively simple legal concept that means a mutual manifestation of assent to the same terms. Mutual assent is usually established by offer and acceptance. One party proposes the terms of an agreement (the offer) and the other party assents to those terms (the acceptance). Real estate transactions almost always start with the buyer making a written offer to the seller.
Offers tend not to cause many legal problems. That is not the case with acceptance. There are often misunderstandings over communicating acceptance. A recurring problem in real estate is acceptance varying from the offer. This happens when little changes are made to an offer by interlineations prior to “acceptance.” All these issues are covered in this topic.
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