Contracts and Real Estate

“An honest man’s word is as good as his bond.”

Don Quixote – Part ii. Chap. xxxiii
Cervantes (1547-1616)

The truth is, if everybody did what they said they would do then nearly all business deals -and nearly all real estate transactions- could be done on a handshake.  So why do we spend so much time, money, and effort drawing up formal written contracts?

Part of the reason is because not everybody does what they say they will do.  Sometimes a party to a contract will get “Buyer’s Remorse” and wish they hadn’t struck a bargain.  Other times, a party might find a better deal “after the fact” and in those cases, they might breach their contract.  Contract performance is always a risk, and when it doesn’t happen, then the first thing the lawyers look to is the written contract as evidence of the deal.

A contract can be a very simple thing.  If property is being sold, then the actual terms of the sale could almost always be stated on a single sheet of paper.  But if this is so, then why are contracts sometimes dozens – or hundreds – of pages long?  The answer is that contracts often involve risk – and a great amount of contractual language deals with how any risk of loss, injury, damage, fire, catastrophe and Acts of God are going to be handled.  If no disaster or catastrophe happens, then all of the work in carefully drafting a contract will have been for nothing.  But if something goes wrong in the performance of the contract, then a court will look very closely at the language that the parties agreed to. In that situation one of the parties may be glad that they spent the necessary time and money to carefully negotiate the contract.

There are generally two distinct stages to contract issues.  They are 1) formation, and 2) performance.  Legal problems can arise at either one of these stages. Legal services by good legal counsel in the formation stage can help avert problems later on when performance issues arise. A real estate or business transaction that is skillfully negotiated and handled will likely give rise to far fewer problems than a deal that is put together in a rushed or thoughtless manner.

Despite good intentions by everyone involved, even if the world’s best contract is signed, there can still be problems when the time comes for contract performance.  There are a multitude of reasons why a party may not choose to -or be able to- perform a contract. Financing problems can arise; situations can change; values and intentions can shift. When performance problems arise, the assistance of skilled legal counsel can be critical to the outcome of a contractual issue.

Copyright 2017 ROBERT B. JACOBS