Contract Defined - Certain Contracts Invalid Unless in Writing - Contract Must Contain the Whole Agreement - Excludes All Prior Negotiations - Seller Must Produce Marketable Title - Performance or "Tender"; How Effected - Full Instructions as to Buying the Property and Executing the Contract - Specific Performance - Rights of Buyer and Seller - Meaning of "Incumbrances" and of "Usual Covenants" - Vendor's Lien - Damages for Breach of the Contract - Extinguishing or Rescinding the Contract - Practical Forms, Nos. 2 to 12, of Options, Contracts, Etc.
Sec. 61. A contract is an agreement between competent parties to do or not to do a certain thing.
Sec 62. A real estate contract may be (1) an agreement to sell, (2) an agreement to buy, or (3) an agreement to buy and sell - and relating to the transfer by one party to another of a certain property at a certain price and upon certain terms.
Sec 63. The following contracts are invalid unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged or his agent, namely:
(1.) Every contract for the sale of lands, or any interest therein;
(2.) Every contract that by its terms is not to be performed within one year from the making thereof;
(3.) Every contract to answer for the debt, default or misdoings of another.
(4.) In California an agreement employing or authorizing an agent or broker to purchase or sell real estate for compensation or commission, must be in writing.
(5.) Also, such an agreement, if made by the agent of the party sought to be charged, is invalid, unless the authority of the agent be in writing subscribed by the party sought to be charged.
Sec. 64. Not only should a contract for the purchase or sale of real estate be in writing, but it should contain within itself, without resort to external evidence, the whole agreement, including the names of the contracting parties, the price to be paid, and all of the stipulations intended to bind the parties, and such a description of the land as will enable any one acquainted with it to learn, upon reading the contract, what property was intended to be sold. It is not necessary that the memorandum should be in one written instrument. The negotiations containing the offer and acceptance may have been conducted by means of correspondence. All writings so connected by their own internal evidence constitute one document in law. (Curwen on Abstracts.)
Sec. 65. A contract, when once reduced to writing, and executed and delivered by the parties thereto, becomes the sole repositary of the agreement between them, and excludes all prior negotiations and conferences on the subject. If the terms of the written agreement are ambiguous, they may be explained verbally; but no evidence to contradict what is incorporated in the writing can be offered to show that the parties at the time intended something different, unless it is proven that there was fraud in the transaction. The writing must be signed by the party to be charged and is valid though not signed by the party insisting on the performance of it. It is not necessary that the signing should be at the end of the paper.
Sec. 66. It is an implied condition in all sales that the seller shall produce a fair marketable title to which no reasonable objection can be made. For definition of marketable title, see Chapter I (Of Real Estate In General), Sec. 17. If, upon investigation of the title, it is discovered, before the deed is delivered, that the seller does not possess title to the extent required by the contract, he is not liable in damages for the defect; the buyer is at liberty to take the land with the defect, abating a proportionate part of the price; or, if the defect is material, the buyer may decline to go on with the bargain. If there are any incumbrances on the property not disclosed at the time of the sale, the buyer may require them to be paid off before he takes his deed. No purchaser is bound to accept a title dependent upon doubtful questions of law or upon facts which are impracticable for him to investigate with satisfactory results at the time the deed is tendered. (Curwen on Abstracts.)
Sec. 67. It sometimes happens, after one has entered into an agreement to purchase a certain piece of land, that the seller declines to execute and deliver a deed, in performance of his part of the agreement. The obligation of the buyer in such case is complied with by an offer of performance, or "tender" as it is called. A tender to be good must be absolute, unconditional and strictly within the terms of the contract. A tender does not bar nor extinguish the debt; the debtor is still liable to pay it; but tender bars the claim to subsequent damages, interests and costs. The offer may be made to the seller wherever he can be found. The tender must be made in United States gold coin, or in legal tender certificates. It is always safe to produce and show the money. A tender for more money than is due is good for what is due. The seller sometimes purposely evades the buyer in order that tender cannot be made. In such a case, the buyer must use reasonable diligence to find the seller within a reasonable distance from the residence, or place of business of the seller. If the contract of sale fixes a time for the tender, it must be made at that time, within reasonable hours, and not before nor afterwards. In California, the obligation for the payment of money is extinguished by a due offer of performance, if the amount is immediately deposited in the name of the creditor in a bank of good repute, and notice thereof is given to the creditor. An offer of partial performance is of no avail; nor is an offer of complete performance of any effect unless the person making it is able and willing to perform according to the offer.
Sec. 68. A majority of real estate sales are made through real estate agents or brokers. Each agent has his own form of agreement. The buyer makes a deposit of say from $50 to $500, according to the magnitude of the transaction, when he signs the contract of sale. The larger the deposit the less likely the buyer is to forfeit it. The agent then brings the contract of sale to the seller for his signature, by way of ratification of what the agent has done. At least, that is what the agent should do. This brings the terms of the contract of sale before both the buyer and the seller, and each is then committed in writing to the transaction. The seller should make it a rule to receive the deposit into his possession, and if it is in the form of a check, to have check converted into cash as quickly as possible. The seller should see that agreement provides that if the buyer does not pay the balance of the purchase price within a certain time, (say ten to fifteen days) the deposit shall be forfeited to the seller as liquidated damages. The seller should have an understanding with the agent to the effect that if the deposit is forfeited and the sale not consummated, the agent will accept 5% of the amount of the deposit for his services in the matter. The contract should also provide who is to pay the taxes, if any, which have been assessed but are unpaid at the date of the sale, or which have been partially paid. If there is a mortgage on the premises, which the debtor is to assume, the agreement should so provide, with a statement to the effect that the seller will pay the interest on the mortgage to the date of the transfer. If the premises are insured, the agreement should provide for the transfer of the unexpired policy of insurance, and should state whether or not the same is to be assigned to the buyer, without charge. In short, the more complete the agreement, the more smoothly and effectually will the deal be carried through after the contract has been signed. The contract should be executed in duplicate by both of the parties and one copy be delivered to and retained by each party. The purchaser, where he buys through a real estate broker, has nothing to do with the payment of the broker's commission, although he does, as a matter of fact, pay it indirectly. The commission must be borne by the seller, and arranged for by him. It sometimes happens that some miserly chap will not allow a commission on the sale of his property, and in case the seller will deal only through and upon the advice of a certain broker, the buyer, if he ardently desires the property, may find it expedient to arrange to pay the broker a commission. The contract, in any case, is the final act of purchase and sale; and a complete agreement presupposes a prior investigation into facts on which to base it; this investigation in the case of real estate will be more readily attained by following the "Real Estate Purchase Chart" (Form No. 1) hereinbefore given.