How to Walk Away From a Purchase Agreement

Is your purchase agreement legal?

Purchase agreements, simply put, are contracts to buy something. A purchase agreement may refer to a contract to buy real estate, goods or services. Generally, the law requires parties to a purchase agreement to be competent adults who are serious about the deal they are making. The terms of the agreement must be clear, and a legal rule called the Statute of Frauds requires some purchase agreements to be in writing.

Instructions

1. 

   Determine if the agreement is valid.

   Evaluate the purchase agreement's enforceability. For example, it is perfectly legal for some contracts to be oral. However, if your bargaining covers real estate, goods over $500 ($5,000 in some states), or if the agreement will take more than one year to perform, the Statute of Frauds may require it to be written and signed. Also, evaluate if the terms are clear. If an important component, such as the sales prices, is not final, the agreement may be invalid. Ask if everyone involved had serious intentions and be certain they are all competent adults. If the agreement lacks any of these essential components, the risk in walking away from the deal may be less.

2. 

   Review all provisions.

   Review all provisions, paying especially close attention to paragraphs using such words as "breaches," "liabilities," "defaults," "cancellations" and "remedies." These legal terms address what will happen if a party cancels the agreement and what rights and liabilities they may encounter if they walk away.

3. 

   Determine if a breach has occurred.

   Determine whether the other party has "materially breached" the agreement; that is, whether they failed to meet some substantial obligation under the terms of the contract. It is also important to determine whether you have breached the agreement. Canceling an agreement for no other reason than a change of mind may be a breach in and of itself. Since breaches can lead to lawsuits, you want to avoid them if at all possible.

4. 

   Get a Mutual Release of Purchase Agreement

   Obtain a Mutual Release of Purchase Agreement. A release should state that the parties agree to cancel the agreement and will not sue one another. If a buyer has paid a deposit up front, the release should also address whether the deposit is to be returned, forfeited, or divided between the parties.

5. 

   Seek professional advice.

   Seek professional advice. It is important to know that there is no one, universal purchase agreement. They can vary greatly in form and terms. There are also exceptions to the general principles discussed, and individual state laws can vary. Particularly, if a mutual release cannot be obtained, it is always wise to consult an attorney to review your specific situation. A quick, professional consultation can often prevent legal troubles.

References

• American Law Institute; "Restatement (Second) of Contracts"; 1981
• Uniform Commercial Code, Sec. 2-201.