LETTERS of INTENT

Letters of Intent can provide parties a framework for their thoughts

For many years I have written about the value of the written offer. The real estate business is in constant flux with “Buyers Market” or “Sellers Market or this past week, the third week of the pandemic when the Federal Reserve dropped interest rates to near zero. Sounds good doesn’t it? In this case there is not enough equity in the market to cover so interest rates popped to % 5.5. They are retreating this week.

We believe and hope that rates will come back down very soon. The question is what to do. I have a client that is ready to buy now. Keep looking?

We found a home but the seller is not ready to sell yet. My buyer wants to let them know that if everything works out and they are a bit flexible that she is interested.

Executable or Non-Executable

In crafting a letter of intent the idea is to let the other party know all of the details of your thoughts in regards to an Purchase Agreement. In fact if you put all of the elements of a contract into a Letter of Intent without titling it Non-Executable you have made an offer according to many courts.

Elements of a Contract

Offer

First, an offer must be extended in order to begin a contract. This should include details of the agreement and its terms and conditions. Simply put, the offer is the offeror’s attempt at entering into a contract with another.

Sometimes businesses will look for contractors through an invitation to treat by letting people know that they are interested in entering into a contract.

Acceptance

Once the offer is extended, it’s in the hands of the offeree to either accept or reject the proposal and its terms and conditions. Offeree’s can accept offers via mail, email, or verbally.

Most states use the mailbox rule meaning that, if an offer is accepted via mail or email, the moment the acceptance is placed in a mailbox to be mailed or sent via email, it has officially been accepted. This holds true even if the offerer never receives the acceptance. Within this acceptance, there needs to be a clear statement that the terms of the agreement are all accepted.

Meeting of the Minds

The meeting of the minds in contract law refers to the moment when both parties have recognized the contract and both agreed to enter into its obligations. This is also called:

• Genuine agreement
• Mutual agreement
• Mutual assent
• Consensus ad idem

Even after the parties have entered into the contract, it can be voided a few different ways including duress, undue influence, fraud, or misrepresentation.

Consideration

Something of value must be exchanged in order to have a valid legal agreement. Usually, things like products, property, protection, or services are offered for the exchange of money.

If not trading in money at all, the parties should be sure that the court would view whatever they are trading, also called their consideration, as valuable.

Capacity

Each party must be fully able or have the legal capacity to enter into the contract in order for it to be considered valid. For instance, you cannot enter into a legal contract with a three-year-old. Both parties must be of their right mind in order to form a contract, so a valid agreement could not take place if one of the parties is under the influence of any mind-altering substance.

This also includes the desire of both parties to enter into the agreement free from coercion.

Legality

Contracts cannot be created to govern the trade of illegal products or services. A drug dealer cannot enforce a contract with their buyer if their buyer doesn’t pay them.

Each party must show legal intent, meaning that they intend for the results of their agreement to be completely legal.

You are Not an Attorney NOR Am I. I posed this article to our brokers and legal team. The bottom line is that you have to be an attorney to write a legal document as I have described. Many Realtors that have done this work for a long time have utilized this Letter of Intent tool in commercial real estate where it is common. An attorney will protect your interest also.

For Now,

Bob “Tooch” Santucci