1. There’s no turning back once the deal is signed.
A sales agreement is a legal document. It can go by many names including purchase contract, contract of sale or purchase and sale agreement. No matter what it’s called, once you sign it, you must abide by its terms. Any agreements or promises made under the agreement must be fulfilled by the buyer and the seller, unless there is specific language limiting some of the terms therein and providing an escape clause, which will be discussed below pertaining to contingencies.
There are reasons people decide to violate a sales agreement or refuse to complete a sale. In these cases, the court can order the buyer or seller to fulfill the agreement or compensate the other party for any loss they may have incurred. In some instances, the injured party can also have their legal expenses paid.
2. Things will not always go as planned, so have a Plan B.
Because both parties are bound by law to complete the sales transaction, it’s important to ensure you can fulfill your part of the deal. While this seems simple, there are times when a buyer can’t get enough money to pay for the transaction or the seller is not able to provide the item or service that had been offered.
It’s important to think about these types of situations when drafting the sales agreement. A home buyer should not be held liable if their mortgage falls through and a seller should not worry about a lawsuit if the vase they’re selling is damaged. A sales agreement should plan for contingencies and allow either party to terminate the agreement is necessary. Contingency language is very important to protect from events that are out of the control of one of the parties who executes the contract. If the contingency does not occur, language can be drafted to relieve a particular party from the contract without being exposed to suit and a damages claim.
3. Get legal advice before you need it.
There are many things a person can do for themselves, drafting a sales agreement is not one of them. An attorney can draft a sales contract that will protect you and help you avoid the court costs and legal fees that can arise if you’re sued. Not only are legal battles expensive, they take time and can cost a business their reputation.
As a buyer, you don’t need to worry about drafting a sales agreement, but that doesn’t mean you should not seek legal advice on some purchases. Many major purchases are made with a sales contract, including the purchase of a home, a business or land. These types of agreements should be reviewed by an attorney to make sure you, and your money are protected.
4. Sales agreements are not always in writing.
Oral agreements can be legally binding. If you’re selling your home and agree to certain repairs orally, you may be held liable if those repairs are not made prior to closing the sale of your home. In certain circumstances, some courts can force you to pay for those repairs, even if they are not mentioned in the sales agreement.
The problem with oral agreements is that they are not easy to uphold in court. If possible try to get any agreements made, regarding the sale, in writing. With a written agreement, there is no need to try to prove something was said and likelihood of each party fulfilling all of the actions laid out in the agreement is greater.
5. There are a number of provisions that should be in your sales agreement.
While each sales agreement can be different based on the type of transaction, there are certain elements that should always be in the contract:
– The date of the agreement
– The date the sale will close
– The purchase price
– The legal description o the property
– The amount and type of down payment
– The escrow agreement terms
– Contingent language
6. The sales contract should list the rights and responsibilities of both the buyer and seller.
In addition to the standard contract provisions, the agreement should explain the rights and responsibilities of both parties. These items are things the buyer and seller should agree upon during negotiations. These items can include:
– Who is responsible for paying utilities on the property until closing?
– When will the buyer be able to take possession of the property?
– When will the seller be able to cancel the insurance on the property?
– Who will be responsible for property taxes until the closing date?
– What penalties exist if the seller does not vacate the property by a given date?
– What items are included in the sale? Appliances? Furniture? Decorative items?
– Are there any repairs the seller has agreed to complete before closing?
– Are there any repairs the buyer has agreed will not be made by the seller?
– What are the consequences for not fulfilling these responsibilities?
– Who is responsible for taxes and liabilities associated with the property being transferred
7. The sales contract can contain other contingencies.
In addition to the standard provisions and rights and responsibilities, a sales agreement can also contain contingency provisions. These provisions allow for the buyer or seller to break the agreement, under certain circumstances, and lays out the penalty for doing so. Without this agreement, the buyer could lose their deposit if they need to back out of the sale. There are three basic types of contingencies which should be in the sale contract.
– The financing contingency allows the buyer to break the agreement if they are unable to secure financing. The validity of the contract depends on the ability to obtain a mortgage.
– The inspection contingency allows the buyer to break the agreement based on the results received by a home inspection company. The contract depends on a satisfactory result from the property inspection.
– The attorney approval contingency allows the contract to be broken if either party is not satisfied with the sales agreement. The contract depends on the attorney’s approving the sales agreement.
While these are the basic types of contingencies, there are others that can be included in a contract. The buyer and seller should review these contingencies and negotiate as needed to ensure they’re protected. A contingency is a good way to ensure your interests are safeguarded.
If considering entering into any form of a sales agreement and want to know your rights, contact Tindall Law Firm at 203-755-0018.