Real Estate Contracts in California - The Law, What Makes them Legal, and Damages in the Event of their Breach
By The Law Offices of R. Sebastian Gibson
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A look at the legal requirements that make real estate contracts legal or invalid and the damages that can be awarded for breach of a real estate contract in California.
It doesnít matter where you live, if you eventually ever buy or sell real estate again, you need to know what makes a real estate contract legal.
A real estate contract can be written, oral, or implied. But in real estate law, only some real estate contracts can be oral such as commission sharing agreements, while almost every other type of real estate contract must be in writing.
The Statute of Frauds in California requires these contracts to be in writing: leases for more than a year, commission agreements between principals and real estate licensees, and contracts for the sale of real estate.
The required elements of all contracts in California are: the capacity o f the parties to enter into the contract (not minors, not people of unsound mind, not intoxicated or drugged parties), an offer containing all the material terms, acceptance of that offer, communication of the acceptance, mutuality of consent, and consideration (anything of legal value).
While in many real estate contracts, a good faith deposit is made, this deposit is not required for there to be a valid contract.
In real estate law, there are common situations that arise which donít arise as often in other situations. For instance, real estate offers often have expiration dates. Options are used frequently by builders in land contracts. Counter-offers can be numerous.
Additionally, in real estate situations, and especially in bad economic times, parties try to avoid being bound by contracts more often. Grounds for avoidance include duress, undue influence, fraud or misrepresentation, and mistake.
A party can be defrauded in the inducement to sign the contract for instance by failing to disclose material facts. A party can also be defrauded in the inception by making a person believe they are signing something else all together. When obtaining celebrity autographs, itís therefore not a good idea to try to get them to sign for your meal at the same restaurant.
A party can also illegally be induced into breaching a contract. This tort requires proof of the following: a valid contract with another, knowledge of the contract, intent to induce a breach, a breach, improper or unjust conduct in inducing the breach, and damages.
One can also be sued for interference with an existing contractual relationship. For this type of lawsuit to be successful you must prove the existing valid contract, knowledge, intentional acts to interfere with the contract, actual interference and damages.
Remedies for breach of contracts include damages, specific performance of the contract despite its breach or rescission of the contract. Real estate contracts often provide for liquidated damages, i.e. a specific amount of damages to be paid, in the event of a breach.
While in general there are no punitive or emotional damages available for breach of a contract, there are exceptions. And if the contract provides that the prevailing party is entitled to attorney fees and costs, the losing party will be responsible for both his or her own attorney fees and costs as well as the other partyís attorney fees and costs.
ABOUT THE AUTHOR: R. Sebastian Gibson
Sebastian Gibson graduated cum laude at UCLA in 1972 and received two law degrees in the U.S. and the U.K., graduating with an LL.B. magna cum laude from University College, Cardiff in Wales and a J.D. from the University of San Diego School of Law in Southern California.
Mr. Gibson began his legal career in San Diego before practicing for a number of years in London, England. Today, he has offices in Rancho Mirage and Palm Desert, Newport Beach, and the firmís Of Counsel office is in Carlsbad, San Diego.
Mr. Gibson practices litigation in a wide variety of areas of law including real estate and construction law throughout Southern California from La Jolla, Carlsbad, Oceanside, Chula Vista, Corona del Mar, San Luis Obispo, Cambria, Newport Beach, San Diego, Orange County, Santa Barbara, Ventura, Oxnard, Santa Ana, Riverside, Huntington Beach, Santa Ana, Irvine, Anaheim, Rancho Cucamonga, Ontario, Palm Springs, and Palm Desert.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.