“Do I have a valid agreement or can I entertain other offers?” In this day and age, this a question that is becoming increasingly prevalent. For example, you receive a call from a buyer’s agent and the agent indicates that their client has agreed to buy your listing at full price, with no contingencies, closing in ten days. That’s a pretty spectacular offer for your seller, and you indicate that the offer will get the deal done. The buyer’s agent thereafter memorializes all of the terms into a perfectly prepared FR/BAR Contract form, and the buyer properly initials each page, and executes the signature page. The buyer’s agent delivers the perfectly prepared and executed contract to you. The contract contains each and every provision to which the parties agreed verbally.
Before you can deliver the contract to your seller for execution, you receive another offer. The terms are even better. Are you bound by the agreement you reached with the prior buyer and their agent? Generally speaking, you are not. Florida Statute 725.01 states that an action pertaining to a contract for the sale of lands may not be brought “unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof, shall be in writing and signed by the party to be charged therewith…” In other words, if the seller does not sign the contract, the buyer cannot bring suit to enforce it. So under our scenario, the seller can clearly entertain other offers.
Now what happens if your receive that same contract, your seller executes it, but your seller strikes through the purchase price, increases the amount, and initials it. Under Florida law, you do not have a contract unless there is a meeting of the minds (i.e. a mutual agreement) as to all material terms, which means the act of striking through the price would be considered a counteroffer (and not yet a binding contract). You deliver the counter offer to the buyer’s agent, but before the buyer can sign it, you receive a better offer. Must you honor the prior counter offer or can you accept the new offer? The simple answer is if you properly revoke the counter offer before it is signed and delivered by the buyer, then you can proceed to entertain the new offer without legal liability to the original buyer.
These are fairly clear examples, but unfortunately we do not live in a clear world. More often than not, it is a missing initial to an altered term that creates the potential issue. If one or more initials are missing, do you have a valid contract? The answer is a phrase that lawyers love to use…”it depends”. If the term or terms that were not executed or initialed are considered material, then you do NOT have a valid contract. The question of whether a term is considered material is the subject of extensive case-law, but some obvious provisions that most would consider material are the following:
- Purchase Price
- Financing contingency and terms
- Closing Costs
- Closing Date
- Representations and Warranties
- Due Diligence Periods
- Repair Limits
If there is no meeting of the minds as to one or more of these terms, then you do not have a valid contract. Obviously the contract contains a litany of other provisions that may or may not be considered material, and for that reason, if you have a question about whether or not your contract is valid, we strongly encourage you to consult with your real estate attorney.
Berlin Patten Ebling, PLLC
Article Authored by Evan Berlin, Esq. firstname.lastname@example.org
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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