What makes a contract valid
A contract is a promise, or a set of promises, that the law will enforce. Real estate runs on contracts: listing agreements, purchase contracts, options, leases. Before you can work with any of them, you need to know what makes one valid in the first place.
The essential elements
A contract generally needs four things:
| Element | What it means |
|---|---|
| Competent parties | Each party has legal capacity: of legal age and of sound mind. |
| Offer and acceptance | The parties agree to the same terms. This is also called mutual assent or a "meeting of the minds." |
| Consideration | Each side gives up something of value or makes a binding promise in exchange for the other's promise. |
| Legal purpose | The goal of the agreement is lawful. |
For real estate there is a fifth requirement: a writing. Florida's statute of frauds, Fla. Stat. 725.01, says no lawsuit may be brought on a contract for the sale of land, or of any interest in land, or on a lease of land for longer than one year, unless the agreement (or a note or memorandum of it) is in writing and signed by the party to be charged, or by someone that party lawfully authorized. The same section also covers agreements that cannot be performed within one year.
"The party to be charged" means the person you are trying to hold to the deal. A seller who signed can be held to it; a buyer who never signed generally cannot.
Note what the statute does not require for the contract itself: notarization, recording, or a broker's approval. Those can matter for other documents, like deeds, but they are not elements of a valid sale contract.
Express or implied
- An express contract states its terms in words, spoken or written. Every purchase contract you will handle is express.
- An implied contract is inferred from the parties' conduct. Order a meal at a restaurant and you have promised to pay, even though no one said so.
Bilateral or unilateral
- A bilateral contract is a promise for a promise. The buyer promises to pay; the seller promises to convey. Most real estate contracts are bilateral.
- A unilateral contract is a promise in exchange for an act. Only one side is bound, and only once the other side performs. "I'll take $300 off next month's rent if you repaint the fence by Friday" is a unilateral offer: the tenant has promised nothing and accepts only by doing the work.
Executory or executed
- Executory: something is still left to do. A signed sale contract is executory until closing.
- Executed: every party has fully performed. (Don't confuse this with "executing" a contract, which just means signing it.)
Valid, void, voidable, unenforceable
| Status | Meaning | Example |
|---|---|---|
| Valid | Has every element; binding and enforceable | A signed purchase contract between competent adults for a lawful sale |
| Void | No legal effect from the start; no one can enforce it | A contract with an illegal purpose |
| Voidable | Valid until the party with the right to cancel chooses to cancel | A contract signed by a minor, or one induced by fraud or duress (the minor, or the victim, may cancel) |
| Unenforceable | May be a real agreement, but a court will not enforce it | An oral contract to sell land, which fails the statute of frauds |
The difference between void and voidable trips up a lot of candidates. A void contract was never a contract at all. A voidable contract is a real contract that one protected party may walk away from. If that party chooses to go ahead, the contract stands.
An unenforceable contract is different again. If both parties perform voluntarily, the law does not undo the deal. But if one side backs out, the other cannot get a court to make them perform.