When is a contract legally binding?
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When is a contract legally binding?
I put a contarct on a foreclosure. The bank that owns it operates out of state. The selling broker is in state and the contract /offer was by an in state agent that I retained to represent me. The contract was marked up and signed by a bank officer but he did not change the price. I initialed the bank’s changes/mark-ups, sent it back to the selling broker and gave earnest money as dictated by the contract. However, now the broker says that we do not have a legal contract because in her e-mail to which she attached the signed contract, stated that the bank had countered at $5000 more than the contract stated.
Asked on November 5, 2011 under Real Estate Law, North Carolina
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Once a contract is signed by both parties, it is effective. If one party signs then the other party writes in some changes before signing, the first party must then indicate acceptance of the changed terms as is--e.g. by initialling them--at which point the contract is effective.Technically then, the contract was not effective until you initialed, though a strong case could be made that in signing and sending the contract back to you as signed and marked up, the bank was making you an offer (based on the contrac) which you could accept.
IF the email indicating that there was a counteroffer was from the bank officer, there would likely be an issue as to whether the bank had in fact agreed to the price term of the contract--and thus, whether the contract was effective. However, when the bank signed the contract and a third party--e.g. the broker--included a term in the contract not found in the signed contract, it would appear that the contract is effective, both because the counteroffer was mentioned by someone not actually a party to the contract and because the evidence suggests it was added after the bank had first offered back to you with the changes you accepted (i.e. first the bank officer marked up and signed, which created a new counteroffer for you to accept and form a contract; then the contract was emailed to you with the broker's comment).
As a practical matter, if the bank refuses to honor the contract, you'd have to sue them to force them to do so. It may make sense to consider agreeing to the higher price or, if not, at least settling in the middle, so as to avoid the delay and cost of litigations.
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