HOW IS A CONTRACT FORMED?

A contract is an agreement between two or more parties.  California Civil Code Section 1549.  It is formed when there is a “meeting of the minds”, i.e. when all sides agree on the key terms of their agreement.

In a technical sense, a contract requires three elements: offer, acceptance and consideration.  An offer is when one party proposes to another to enter into a transaction.  An acceptance is when the other party agrees to the terms of the offer.  Consideration is the legal requirement that some value be given to each side.  Consideration is rarely an issue in real estate, because written contracts are presumed to have consideration,  California Civil Code Section 1614, and most real estate contracts are in writing.

There are other requirements for contract formation.  The parties must be capable of consenting; children, the insane and some felons are not capable of consenting.  California Civil Code Section 1556.   The contract must be for a lawful purpose.  California Civil Code Section 1596.  If two or more people, such as spouses, own real property then, if they do not all agree to the sale, the contract may be defective.

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