7 Essentials of Real Estate Contract in BC, Canada

7 essentials of real estate contract
There are usually 2 types of contracts involved in Real Estate transactions, Agency contract. (That’s the contract between me as an agent and my clients Whether buyer or seller) and second type of contract in real estate  is “Contract of Purchase and sale” which is an agreement between a buyer and a seller.
Let’s talk like lawyers do, Before there can be a contract, there must be a “Consensus Ad idem” That means “Meeting of the minds” What the heck that means, it means that the parties must agree on the fundamental of the contract TERMS. to form a contract, there must be an offer from one side and acceptance from the other party, That’s meeting of the minds.
 
In a more precise description, The terms contract means “Promise” or “Promises” made between the parties.
To form a contract there are 7 essentials:
Before we go through the real estate contract essentials, let me give an example on how it sounds.
So my buyer client Joe, comes to me and says, Hey buddy, remember the house you showed it to me the other day, seems nice. Can you write an offer on my behalf to the Jones family?
I’d like to buy their house for $1000 but I want to make sure there is no problem with the house first. An as a gesture on how serious I’m, I’ll give them $10 bucks. But, if there is an issue with their home, I’ll get my $10 bucks back ok?
By the way they are ok with the price and all, I can move in to their house in a month, my wife is exited about that. When I write this on a pare for Joe and he signs it that creates the first essential of Contract. Offer.
1-Offer & or Counter Offer:
Offer is a promise made from one party to another. Which usually followed by either expecting an acceptance from the other party which the offer is made to or receiving a Counter Offer. . In Real Estate, these offer and counter offers must be in writing to be enforceable.
 
 
So I give the offer paper on behalf of Joe, to the Jones family and since Joe asked me to give them a deadline to this offer, we put a date for Jones family to respond to Joe’s offer.
So the Jones family re-write on Joe’s offer and countered his offer at $1,500 and accepted the other terms, like deposit of $10 buck and moving in one month if Joe after checking and reviewing all the relevant things and is ok with the condition of their home.
A counter offer is considered a new offer made from the other side of party back to the original offeror. This offer is modification of the original offer suitable and or preferred by the party received the offer in first place.
 
So Joe looks at me and goes: You know what, Happy wife, happy life, no matter how much I love my wife, I don’t want to pay more than $1,250 and that’s my final offer.
So I drafted another counter offer from Joe to the Jones family with a new deadline for them to review and respond. This time around, the Jones, accepted Joe’s offer.
-2- Acceptance is the second essential to the Contract. Acceptance, like the offer,  must be given in a clear form. So Joe cannot say if I don’t hear from you, I assume you have accepted my offer.
 
Now that Joe’s offer is accepted by the Jones family, joe has promised $10 buck deposit. This is the third Essential for Contract and the deposit legal term is Consideration.
Consideration is a legal term for something of value. It could be in a form of a right, benefit or profit or interest.
Deposit as consideration must be something of value and in real estate is usually an amount of dollar value.  How much deposit is a good deposit?
It certainly reflects the core meaning of deposit as Consideration. It should be of value to the party the offer is made to. There is no set amount. However, in our region where we practice real estate, 5% and more seems to be the norm and in competing offers situation, sometimes more deposit is more acceptable to the sellers.
 
 
When the Jones family listed their property for sale at a certain value, they created an intention. And for Joe to Make an offer, it created the forth essential of Contract and that was Intention. Intention shows that the parties are willing to enter into a binding contract and do business together. The contract will not be binding if there's no clear proof of intention to enter into legal relations.
 
The Fifth essential element of a Contract is Capacity.
The first 2 elements of the contract, Offer and Acceptance, must be performed by a person of Capacity. Meaning those people need to be in the
A)Acceptable age. In British Columbia, the assigned legal age is 19.
B)Not be in Mental incapacity and insanity which is also part of
C)Drunkenness
Well, I could assure when Joe asked me to write him the offer, he had the perfect capacity to do so.
When Joe wanted to make an offer on the Jones family house, he had a genuine consent on the terms of his offer and clearly understood the substance of the contract. He also certainly expected the same from the Jones Family when they accepted his offer and both created a binding lawful contract. This is the sixth essential element to a contract and that is Genuine Consent and or in legal term meeting of the minds
 
7th essentials of the contract is Legal object.
A enforceable contract must be legal. Meaning, a contract between two parties to do something illegal is not binding. Joes offer to the Jones family was based on legal terms without breaking any law and or proposing anything to that nature (like proposing a way to hide the taxes and so forth).
 
Well at the end, luckily, after Joe done his due diligence and found there was no issues with the Jones family. He was satisfied with the price he paid and his wife was happy and looking forward to move in to their new home.
To summarize, the 7 essentials of a real estate contracts are:
-Offer
-Acceptance
-Consideration
-Capacity
-Legal intention
-Legal objective
-Genuine Consent (meeting of the minds)