A Contract for Purchase and Sale is the basic contract that defines the rights and obligations of both the seller (vendor) and buyer (purchaser).
A contract for purchase and sale must be in writing. Both the seller and the buyer must sign the agreement with the knowledge that it is a contract and that they are bound by its terms. Each party must be at least eighteen years old and must have a clear mind when signing.
Typically a contract for purchase and sale is created when one party accepts the other party's offer to purchase or counter-offer by signing the offer to purchase form. Once the agreement is signed by both the buyer and the seller, it cannot be changed by one party without the other party's written consent.
When a buyer decides that they want to purchase a particular property they can make a formal offer to purchase. It is important that buyers not be pressured into making an offer as it cannot be taken back once it is accepted. Typically offers to purchase are only open for acceptance for a specified period of time.
These are typically provided by the real estate agent. This does not mean that changes cannot be made to the standard form. Clauses can be removed or varied and conditions may be added.
It lists other terms applicable to the purchase of the property. If the buyer wants to enter the home before the possession date to take measurements or to make sure the house is still in good condition, this should be included in the offer. If the seller has leased part of the home to a tenant and the buyer will allow the tenant to stay, this should also be stated in the offer.
A phrase like "time is of the essence in this contract" contained in the offer means that any dates stipulated, such as those for accepting the offer or closing the deal, are deadlines that must be met. These dates, like other provisions in the contract, may be changed with the written agreement of both parties.
This is the date that the buyer will take physical possession of the property. Everything that must be done before the property can be transferred to the buyer must be done by the possession date.
By law, sellers are entitled to take all moveable property but must leave everything that has been attached and can no longer be easily moved. Whether an item will be considered permanently attached is not always clear. In order to avoid future disputes, an offer to purchase should clearly state what will be left behind.
The fact that an article is screwed, nailed or bolted down may not be enough to have it classified as permanently attached. Consequently, things such as blinds, awnings, screen doors and windows, attached floor coverings, drapery tracks, curtain rods and brackets, electrical, plumbing and heating fixtures and attachments, water softeners, trees, shrubs, garden sheds, storage sheds, and major appliances should be specifically mentioned in the offer if they are to be included. If there is a current surveyor's real property report and the buyer wants it included, it should also be mentioned.
Conditions that are commonly found include "subject to obtaining suitable financing", "subject to approval by a third party" (for example, a parent or spouse), "subject to the sale of a current residence", and "subject to a satisfactory building or wiring inspection."
A conditional offer gives the party imposing the condition a possible way out of the contract. A reasonable attempt must be made to meet the conditions. If the conditions cannot be met, the contract will end. This option is especially important when an offer is made or accepted before everything else is finalized, such as the sale of an existing home or mortgage approval.
Deposits are held in trust by the real estate agent or a lawyer until the sale is completed. The deposit shows that the buyer is committed to entering into the contract. The deposit is applied to the purchase price. It will be returned if the offer is not accepted or if any conditions stated in the offer cannot be met. Once the conditions are met, a binding contract exists. If the buyer then decides to back out, the deposit will be lost and the buyer may be sued for breach of contract.
When an offer to purchase is delivered, the seller should read it over carefully to ensure that all the terms and conditions are agreeable. On most standard offer to purchase forms the acceptance is on the same form as the offer. When the offer has been signed by the buyer and accepted by the seller, a binding agreement for the sale of the property has been entered into. A seller may want to have a lawyer check an offer before accepting it.
If a seller is unable or unwilling to accept all the terms of the offer, the seller can make a counter-offer. The counter-offer is usually made on a separate form from the original offer. The seller's counter-offer is an offer to sell the property on other terms. It may include some of the same terms that were in the original offer.
The counter-offer may keep everything the same except for the price or it may set out different terms, such as a later or earlier possession date or exclusion of appliances. The buyer can accept those terms or make yet another counter-offer to purchase.
It is important for both the buyer and seller to realize that offers and counter-offers end when the time for acceptance has passed or when they are rejected or a counter-offer (or another counter-offer) is made, whichever comes first.
Let's look at an example. Robin places a house up for sale at a list price of $290,000. Pat puts in an offer of $280,000 and wants all the appliances included. Robin reads the offer carefully and decides that the offer is too low. Robin makes a counter-offer to sell the house for $285,000 without the appliances. Robin's counter-offer terminates Pat's original offer. Pat can accept the counter-offer, meaning the terms and conditions it contains will govern the sale. Pat can also choose to make a new counter-offer, or walk away from the deal.
An offer or counter-offer can be withdrawn at any time before the other party accepts. Offers and counter-offers come to an end when…
If the terms of the agreement, through no fault of either party, become impossible to perform, the contract is frustrated. Frustration ends the contract and both parties are released from their obligations. An example of what might constitute frustration is where the property is destroyed in a flood or a fire before the buyer has taken possession.
Once the offer has been accepted, there is a valid contract for sale and both the buyer and seller are legally bound by its terms. If either the buyer or the seller refuses to comply with the terms of the contract, a lawyer should be consulted about possible legal remedies available to the injured party.
If a seller has a spouse, The Homesteads Act requires the written consent of the non-owning spouse to the sale or mortgage of the homestead. If the seller has no spouse, they must sign an affidavit swearing that they have no spouse. Failure to comply with the requirements of The Homesteads Act may mean that the purchase agreement cannot be enforced.
Buyers and sellers of property in Saskatchewan must comply with The Homesteads Act. This law serves to protect a non-owning spouse's interest by providing that no homestead can be sold, mortgaged or leased without the consent of the spouse who is not a registered owner. The Act applies even if the spouses are separated.
A homestead is any house that either spouse owned, where the couple lived during their relationship. Couples are considered spouses if they are married or they have lived together for two years or more. There can be more than one homestead. Even if the property that is the subject of the purchase is not currently a family residence, compliance with The Homesteads Act may still be necessary.
People typically use the services of a lawyer when they are purchasing a home. Lawyers can provide a number of services to both buyers and sellers.