Jacob D. Lynch
July 23, 2015
Iron Mountain ,MI 49801-0638
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A real estate purchase agreement or contract of sale contains many terms and conditions of sale. If the seller or buyer fails to comply with the terms or conditions, such as the seller failing to provide clear title to the property, that party is said to have breached or defaulted on the agreement, and the other party may have a legal claim against the breaching party. If one of the parties fails to meet a contingency of the contract, such as the buyer failing to obtain financing, the parties will be released from the contract. If there is a dispute between the parties, they must use the dispute resolution process indicated in the contract, which may require the parties to resolve the dispute without going to court.
Purchase agreements and contracts of sale contain many terms and conditions that the parties have agreed to meet, such as:
If the party who is responsible for complying with the specific term or condition fails to comply, that party has breached or defaulted on the contract. For instance, if the seller fails to provide an abstract of title showing clear title to the property, the seller has breached the agreement. Also, if the seller takes lighting fixtures which he had agreed to leave, the seller has breached the agreement. The buyer can agree to a modification of the contract as to the title or the lighting fixtures and the price, or the buyer can offer to perform under the contract and then file a claim against the seller for breach of contract.
If the parties can’t agree on how to resolve the matter, the parties must use the dispute resolution process if one has been included in the contract. Usually, this is arbitration, mediation or small claims court. Such alternative methods for resolving disputes are usually less costly and more efficient than filing a traditional lawsuit. The parties submit the matter to the arbitrator, mediator, or judge, and that person decides which party breached the contract. Sales contracts often provide for liquidated damages if one party or the other breaches the contract-this means that the sales contract provides that should there be a breach of contract, the damages to the party not in breach of contract will be for a set amount of money, which is often the amount of the buyer’s deposit or earnest money.
Purchase agreements and contracts of sale typically contain several contingencies that must be met in order for the sale to proceed. These contingencies can include:
If the contingencies of sale are not met, the buyer can withdraw his offer and get a refund of his deposit. For example, if the buyer can’t obtain financing as described in the sales contract, for example, a loan for a specified amount and interest rate within a set time period, the contingency of the buyer obtaining specified financing has not been met and the buyer can withdraw his offer. The seller is then supposed to refund the buyer’s deposit.
If there is a dispute between the parties on the matter of contingencies, the parties must use the dispute resolution process specified in the contract. The arbitrator, mediator or small claims court judge will decide the matter according to the provisions of the contract.
Purchase agreements and contracts of sale often contain provisions specifying the kinds of dispute resolution that the parties agree to follow if they disagree on the performance of the sales contract. These kinds of dispute resolution can include:
If the contract does not include dispute resolution provisions, the parties can agree to settle their dispute through arbitration or mediation, or they can file a lawsuit in civil court.
If you have any questions about disputes concerning a real estate purchase agreement or a contract of sale, contact a real estate attorney in your area.