The contract: the rest of mutual assent

This post is a continuation of the discussion of the concepts of mutual assent within a contract. Of course, our main focus is the real estate contract, but these concepts are really pretty general. We began with the post on offer and acceptance, and will be finishing up here.

contract

As always, please remember that I am not a lawyer, and I am not licensed to practice law anywhere. The purpose of this post is to provide some general information, not legal advice. If you need legal advice, please consult an attorney.

With that out of the way, let’s continue with our discussion.

Reality of consent

“Reality of consent” sounds stupidly confusing, but think of it this way: the parties must really consent. It has to be a positive emotion. In other words, they have to agree with their whole hearts and minds to do what they just promised to do because they really, really want to do it. If someone made a promise under a threat to avoid something deadly, painful, or emotionally disruptive, then the contract could be determined to be invalid. Agreeing to do something to make something else not happen does not mean you’re really agreeing. See the negative emotion? It can cancel the agreement. It’s called being under duress, and it can invalidate a contract.

There are some other issues that prevent you from really consenting. Being drunk will do it. Misrepresentation, or being lied to by the other person, will do it, too. If both parties to the contract are mistaken about an important fact, or even the existence of the subject of the contract, then the contract doesn’t really exist. For example, if the buyer believes the contract is being made on a certain property, but the seller owns, and agrees to sell, a different property, then there really isn’t a contract. Both parties were mistaken about the subject of the contract.

It’s important to note that if only one of the parties is mistaken about the value of the subject, the contract is still in force. Everybody who is in the contract needs to know what is being bought and sold. Each party has a responsibility of self-protection. In other words, buyers need to know the value of what they are buying, and sellers need to know the value of what they are selling. It is not the other party’s responsibility to clue you in. That’s one of the underlying reasons for appraisals, but in real estate contracts, appraisals are generally done for the benefit of the lender. We’ll talk more about appraisals in the future, because that is an issue that is becoming really important these days.

Statute of frauds

“Statute of frauds” sounds really scary, but for the most part it just means “it has to be in writing.” In Colorado, a real estate contract has to be in writing, and any lease longer than a year has to be in writing, also. A real estate contract in Colorado has to be signed by the seller, or it is void (not just voidable, but void). Interestingly, it does not have to be signed by the buyer, but, of course, a real estate contract nearly always is signed by the buyer as a matter of practice.

There are other violations of the statute of frauds that would impact a contract, but generally don’t involve real estate, so we’ll ignore them.

Parol evidence rule

The concept of “parol evidence”  is the one that confuses most people, but I think that’s because they’re over-thinking it, and getting hung up on the strange name. So let’s start with what that means. Parol is just an old word that means “word.” Parol evidence, therefore, is simply “evidence of word.” In other words, “evidence of what we said.” If you think about it, you’ll realize that “evidence of what we said” is really just writing. 

Parol evidence, therefore, is very closely related to the statute of frauds, but it carries the added concept that not only is the contract in writing, but the writing in the contract actually says what we agreed. Further, the latest version supersedes anything we wrote or said before that. In case of a dispute, you can’t go back to a previous version of a contract and try to use it as evidence of your intent. When you change a contract — in writing — you are acknowledging that you’ve changed your mind, and that this — now — is what you agree to, and will live with going forward.

Like I said, don’t over-think that. Don’t over-think any of it. This whole discussion was put out there for your general information, and to help you start to understand why a real estate contract is so lengthy. My intent was certainly not to make you an expert. If the time comes that an expert is needed, let’s rely on one.

So what’s next? Take your pick.

 

 Randall Brennan | REALTOR in Highlands Ranch

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Yeah. You should probably do at least one of those things right now.