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Contracts • Contract Formation
K#011
Legal Definition
Sale of real estate contracts are invalid if they are missing the price and description of land. Sale of goods contracts do not need to have a price because the court will provide a reasonable price at the time of delivery.
Plain English Explanation
"Goods" are generally not very unique. Whether we are talking yachts or paperclips, it can be pretty easy to figure out a reasonable price based on comparisons and other facts. For that reason, you can have a completely binding contract for the sale of goods even if you don't have an explicit price agreed to.
In contrast, real estate contracts must include a price. Every parcel of real estate is unique. Sure, some may look the same on their exterior, but the value of every parcel can vary drastically depending on many objective and subjective factors. For this reason, courts require prices and descriptions of the property to be in the contract so that a court can later determine, for sure, what was being bargained for.
In contrast, real estate contracts must include a price. Every parcel of real estate is unique. Sure, some may look the same on their exterior, but the value of every parcel can vary drastically depending on many objective and subjective factors. For this reason, courts require prices and descriptions of the property to be in the contract so that a court can later determine, for sure, what was being bargained for.
Hypothetical
Hypo 1: Bob owns a farm. Sam wants to buy his farm. Bob makes a contract that says, "I will sell Sam my property on March 1st." Sam agrees to this. Result: No binding contract has been formed. First off, no price has been identified. Bob must identify the price that he is selling his farm for. Second, there's no description of Bob's farm in the contract. "Property" is too vague. Does he mean property, like his dog? Or does he mean property, like his farm? Moreover, perhaps Bob owns more than 1 piece of real estate. It's vital for the court to be able to tell not only which specific parcel is being bargained over, but how much.
Hypo 2: Bob owns a farm. Sam sells pitchforks. Bob is expecting his farm to grow in size and immediately needs pitchforks. He sends Sam a text, "Hey, can you deliver 100 pitch forks for me on Tuesday?" Sam replies, "Yes." Result: A binding contract exists. If Bob later refuses to pay for the 100 pitch forks, Sam can sue Bob for their reasonable cost.
Note: Always keep in mind that an ideal contract will be super specific and clear with its terms, but that's not the point of many questions you will face on an exam. In the real world, it is common for less-than-ideal situations to happen, like not specifically naming a price for a product. In the court's pursuit of justice and fairness, it's your job to be aware of the various ways to argue for each party's rights.
Hypo 2: Bob owns a farm. Sam sells pitchforks. Bob is expecting his farm to grow in size and immediately needs pitchforks. He sends Sam a text, "Hey, can you deliver 100 pitch forks for me on Tuesday?" Sam replies, "Yes." Result: A binding contract exists. If Bob later refuses to pay for the 100 pitch forks, Sam can sue Bob for their reasonable cost.
Note: Always keep in mind that an ideal contract will be super specific and clear with its terms, but that's not the point of many questions you will face on an exam. In the real world, it is common for less-than-ideal situations to happen, like not specifically naming a price for a product. In the court's pursuit of justice and fairness, it's your job to be aware of the various ways to argue for each party's rights.
Visual Aids
Related Concepts
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Can partial payment of a debt be consideration for release of that debt?
How can an offeree reject an offer?
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Though offers can generally be freely revoked, what are the 4 exceptions?
Under battle of the forms, what happens to additional or different terms in an acceptance when at least one of the parties is a non-merchant?
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Under battle of the forms, what happens to different terms in an acceptance between two merchants?
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What is acceptance?
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What is required to form a valid, binding contract?
What is the effect of a conditional acceptance on an offer?
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What is the effect of a contract that is missing quantity terms?
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What is the effect of an offeree beginning to perform in response to an offer?
What is the effect of a seller sending non-conforming goods?
What is the effect of including additional or different terms to an offer?
What is the effect of part performance of a unilateral contract?
What is the effect of the death of a party prior to acceptance of an offer?
What is the Mailbox Rule and when does it apply?
When are advertisements valid offers?
When are price quotes valid offers?
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Who controls the method of acceptance, and what are the typical ways that an offer is accepted?
