A real estate contract is like any other contract and must follow certain rules for it to be valid and enforceable. Contracts do not have to be very detailed but they do have certain requirements. For a contract to be valid there must have been an offer, an acceptance of that offer and consideration. Consideration is usually the payment of money, but it does not have to be, it just has to be the promise of something of value. The consideration, however, must be defined for a contract to be enforced by a court.
Take for example the case of Alaimo v. Tsunoda. In this case Carl Alaimo (Alaimo) was a real estate broker who had an exclusive agreement with Frank Tsunoda (Tsunoda) to sell a property. After Alaimo found a buyer, however, Tsunoda rejected the offer and ultimately chose not to sell the property. Alaimo is suing Tsunoda for breach of contract.
The parties agreement give Alaimo the exclusive right to sell the property which included a payment of five percent of the selling price. There was, however, no sale price set. The agreement listed the price to be determined at time of sale. The court looked to previous court cases regarding sales contracts without a listed price in making its decision. The court found in this case that the price of the property the matter of price was just as uncertain as it was in previous, settled cases. The price was left open for future settlement. The court found that all the parties did in this case, with relation to the sale of the property, was to agree to agree upon sale price in the future, and as previously decided in California, an agreement to agree in the future is invalid.
In some instances a court can use its judgment to fill in undefined sections of a contract to make it valid. Alaimo tried to claim that the court may determine that the purchase price intended by the agreement is the market value of the land, and that that can easily be ascertained. The court disagreed, however, because the agreement nowhere expressed the market value as the criterion by which the sale price was to be determined. The seller, Tsunoda, had the right to determine at which price to sell the property. Many owners of real property demand more for their property than its market value and will not sell for that value. Alaimo conceded that under the agreement Tsunoda could have fixed an exorbitant price, one which no buyer would pay, and that in such event he would have no right to complain. This illustrates the problem of the contract. Therefore the out ultimately decided against Alaimo and found that Tsunoda did not breach the contract and therefore did not owe Alaimo any money.
Contracts can be tricky. One word can alter its meaning therefore its important to have clear understanding of the terms before agreeing to the contract. Having an attorney review the contract with you before signing can help make sure you are clear on the terms before you are bound by them. If you are in the Sacramento area and in need of an attorney please contact our office.