What Makes Real Estate Contracts Legal in California?

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The last thing you want is to go through the whole real estate process only to find out at the end that the contract isn’t legally binding. According to the Statute of Frauds in California, these contracts must be in writing. Fortunately, real estate agents in California have access to a standard California Residential Purchase Agreement (RPA) form which makes it easy to ensure all the necessary components are included.

In order for a real estate contract to be considered legal, the following elements need to be present. 

Legal Purpose

Obviously, the purpose of a real estate contract is to exchange the title of a home. The buyer gains ownership of the home, while the seller sells the property in exchange for a certain price. In order for any contract to be legal, the purpose of the contract cannot be to execute an unlawful act.

A contract that involves a purpose that’s against the law would be considered invalid. In the case of a real estate purchase agreement, the legal purpose would be the purchase and sale of a property.

Legal Capacity For Parties to Enter a Legal Contract

Anyone who is a minor, or is intoxicated, drugged, or mentally incapacitated is not considered a competent party who can enter into a legally binding contract. In order to be considered valid under the law, a contract needs to involve competent parties.

A person who’s high on drugs might be able to sign a purchase agreement, but that doesn’t mean the contract would be considered valid under the law. The same goes for a 14-year old signing the contract. All parties need to be considered competent in the eyes of the law in order for a contract to be legal.

An Offer

A legal contract needs to include an offer in order for it to hold up in court. In the case of a purchase agreement, there needs to be an offer to purchase the home by the buyer stipulated in the contract.

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Offer Acceptance

The contract isn’t valid until the offer has been accepted by either the buyer or seller. If the original offer is rejected, it can be countered.

At that point, the ball is in the buyer’s court whether or not to accept the counter offer and make the contract legally binding. If the buyer accepts, the only thing left to do is ensure both parties include their signatures as proof of acceptance from both sides. If the buyer does not accept and counters again, the power then shifts again to the seller to accept. Both parties need to be in acceptance of the offer in order for the contract to be binding.

Mutual Consent

Under no circumstances is there to be any type of misrepresentation, fraud, or undue stress in any of the parties who have entered into the contract. Instead, all parties need to have willingly, accurately, and honestly consented to the terms of the real estate contract.

Consideration

There needs to be something of value exchanged between the parties in the contract. In the case of real estate, this is the exchange of title to the home for the agreed-upon purchase price, and needs to be specifically and accurately stipulated in the contract. Basically, “consideration” refers to anything that’s considered of value under the law.

The Bottom Line

As long as all of the necessary elements are met, the real estate contract is considered lawful and legally binding once all of the parties’ signatures are included. That means every party is legally bound to the contract and obligated to carry out their specific promises made.

If not, they will be in breach of the contract and will have to compensate for any damages that occur as a result of their default. That’s the whole point behind a contract: to ensure that everyone fulfills their promises and provides protection to the parties under the law. But in order to take advantage of this protection, the contract needs to be considered lawful. If all the above elements are satisfied, it will be.