Real estate contracts - Essential terms

Learning Outcomes

This article explains essential terms in real estate contracts for MBE-style questions, including:

• The core elements that must appear in a land sale contract—parties, property description, price or price formula, and the signature of the party to be charged.
• How the Statute of Frauds applies to contracts creating interests in land, and what qualifies as a sufficient written memorandum or electronic record.
• When courts will enforce a land sale agreement despite gaps or ambiguity by supplying missing nonessential terms, and when indefiniteness makes the contract unenforceable.
• How part performance, equitable estoppel, and related doctrines can overcome Statute of Frauds defects and support specific performance in equity.
• How to distinguish contract-formation issues from Statute of Frauds enforceability issues, and how that distinction affects the best answer choice on the MBE.
• How to analyze common exam fact patterns involving oral agreements, conflicting writings, vague property descriptions, or missing price terms and determine whether an enforceable contract exists.
• How these doctrines interact with timing provisions and “time is of the essence” clauses in real estate contracts tested on the MBE.

MBE Syllabus

For the MBE, you are required to understand the requirements for a valid and enforceable real estate contract, with a focus on the following syllabus points:

• Identification of essential or material terms in a real estate contract (parties, property, price).
• Application of the Statute of Frauds to contracts for interests in land.
• Consequences of omitting or vaguely stating essential terms.
• Exceptions to the Statute of Frauds in real estate (especially part performance and reliance).
• Distinguishing enforceable contracts from unenforceable agreements or negotiations.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is NOT an essential term that must be included in a real estate contract for it to be enforceable?
   1. Identification of the parties
   2. Legal description of the property
   3. Method of payment
   4. Purchase price
2. If a real estate contract omits the price term but the parties intended to contract, what is the most likely result?
   1. The contract is automatically void.
   2. The court may supply a reasonable price if the parties intended to be bound.
   3. The contract is enforceable only if the buyer is a merchant.
   4. The contract is enforceable only if the seller is a merchant.
3. Under the Statute of Frauds, a real estate contract must:
   1. Be in writing and signed by the party to be charged.
   2. Be in writing and signed by both parties.
   3. Be oral if witnessed by a notary.
   4. Be enforceable if performed within one year.

Introduction

A contract for the sale of real estate is governed by common-law contract principles and must also satisfy the Statute of Frauds because it involves an interest in land. The MBE frequently tests whether a particular agreement has:

• Enough definite terms to form a contract at all, and
• A writing that adequately memorializes those terms so the contract is enforceable.

These are related but distinct questions: one about contract formation, the other about enforceability under the Statute of Frauds.

Key Term: Interest in Land
An interest in land includes not only contracts for the sale of real property, but also leases longer than one year, easements of more than one year, mortgages, and most other arrangements transferring rights in land.

Key Term: Statute of Frauds
The legal rule requiring certain contracts, including those creating an interest in land, to be evidenced by a writing signed by the party to be charged, with the essential terms stated with reasonable certainty.

On the MBE, you are often asked to decide whether a disputed real estate agreement is enforceable. That requires you to:

• Spot whether the agreement involves an interest in land (therefore within the Statute of Frauds).
• Check whether the writing (if any) contains the essential terms.
• Consider whether an exception, such as part performance, allows enforcement despite the lack of a sufficient writing.

Essential Terms of a Real Estate Contract

A contract for the sale of land must include certain key terms to be enforceable. These are sometimes called the "essential terms" or "material terms." If any are missing or too vague, the contract may be unenforceable.

The essential terms are:

• Identification of the parties (buyer and seller)
• Description of the property
• Purchase price (or a method to determine it)
• Signature of the party to be charged (the party against whom enforcement is sought)

Key Term: Essential Terms
The minimum contract terms required for a real estate contract to be enforceable: parties, property description, price, and signature of the party to be charged.

It is useful to connect this to the general contract mnemonic QTIPs (Quantity, Time, Identity, Price, subject matter). For real estate contracts:

• Identity = buyer and seller.
• Subject matter = the specific parcel being conveyed.
• Price = the purchase price or an objective method to compute it.
• Time of performance (closing date) is usually not essential; if omitted, the court will supply a reasonable time.

Courts and examiners distinguish between:

• Terms that must be definite (parties, property, price), and
• Terms the court will supply if omitted (closing date, method of payment, minor conditions).

Identification of the Parties

The contract must clearly identify the buyer and seller. Ambiguity about the parties can render the contract unenforceable.

Names are usually sufficient, but any description that allows the parties to be determined with reasonable certainty will work, such as:

• "John Smith, owner of Blackacre, as seller, and Mary Jones as buyer," or
• A corporate seller identified by its full legal name.

Minor spelling errors or misdescriptions that do not cause real doubt about who is meant will not invalidate the contract. However, serious ambiguity can be fatal.

Examples:

• "Owner agrees to sell my farm to Buyer for $500,000" is usually sufficient if there is only one owner and one buyer in context.
• If there are co-owners, or multiple people who could be "Owner," the description may be too vague.

Agency can also matter. A contract can be signed by an authorized agent instead of the principal.

Key Term: Party to be Charged
The person against whom enforcement is sought in a Statute of Frauds dispute; that party (or that party’s authorized agent) must have signed the writing.

For example, if only the seller signs the land sale contract, the buyer can enforce the contract against the seller (the party to be charged), but the seller usually cannot enforce it against the unsigned buyer.

Description of the Property

The contract must contain a description of the land sufficient to identify it with reasonable certainty. This does not require a full technical legal description, but it must be clear enough that the property can be located.

Key Term: Reasonable Certainty
The standard requiring that the property description (and other essential terms) be clear enough that a court can identify the land and enforce the parties’ obligations without rewriting their bargain.

Acceptable descriptions often include:

• A specific street address ("123 Main Street, Springfield").
• A common name of a unique parcel ("Seller’s residence at 123 Main Street").
• A description by boundaries or lot number ("Lot 5 of Maple Subdivision, as shown on plat recorded in Book 12, page 34").

Problems arise when:

• The description could refer to more than one parcel and there is no way to know which is intended.
• The description is so vague that it cannot be applied to any specific parcel without speculating.

Courts will allow extrinsic evidence to apply an existing description to the land (for example, to show that “Seller’s residence” refers to 123 Main Street). But they will not allow parol evidence to supply a missing description or to choose among multiple fundamentally different parcels.

Worked Example 1.1

A written contract for the sale of land identifies the parties and is signed by the seller, but describes the property only as "Seller's farm in County X." Seller owns two farms in County X. Is the contract enforceable?

Answer:
No. The property description is too vague to identify which farm is being sold, so the contract is unenforceable. The writing does not describe the land with reasonable certainty, and extrinsic evidence cannot be used to choose between two fundamentally different parcels.

Contrast this with a case where a seller owns only one farm in County X; “Seller’s farm in County X” would likely be sufficient because it can be applied to a unique parcel.

Purchase Price

The price must be stated or there must be a clear method for determining it (such as "fair market value as determined by appraisal" or "the county’s assessed value as of January 1").

If the price is missing but the parties clearly intended to contract, some modern courts may supply a reasonable price, but this is not guaranteed. For exam purposes, keep two points in mind:

• For a land sale contract within the Statute of Frauds, the safer MBE assumption is that the writing must state the price or provide a definite formula.
• As a matter of general contract formation doctrine, a court may sometimes infer a reasonable price where the parties clearly agreed on everything else and intended to be bound.

Examples of sufficiently definite price terms:

• "$400,000, payable at closing."
• "The average of three independent appraisals obtained by the parties."
• "The price at which Seller acquires Blackacre from Current Owner."

Examples of problematic price clauses:

• "Price to be agreed later" (mere agreement to agree—too indefinite).
• "A fair price" (courts are split; some interpret this as “reasonable price,” others treat it as indefinite).

On the MBE, if the call of the question focuses on the Statute of Frauds, a missing price term in the writing will usually make the contract unenforceable, unless an exception applies.

Signature Requirement

Under the Statute of Frauds, the contract (or a memorandum of it) must be signed by the party to be charged—the party against whom enforcement is sought. The signature:

• Does not need to be formal; initials, typed names in emails, letterhead plus a handwritten signature, or a mark intended to authenticate can all suffice.
• May appear on any document that, taken together with other writings, shows a contract for the sale of the identified property on stated terms.

Key Term: Party to be Charged
The party against whom enforcement is sought; that party, or their authorized agent, must have signed the writing for the Statute of Frauds to be satisfied.

Electronic signatures and emails generally satisfy the signature and writing requirements under modern electronic transactions statutes, which the MBE assumes.

Effect of Missing or Vague Terms

If an essential term is missing or too vague, the contract is generally unenforceable. But you must carefully distinguish:

• Missing terms that the court can supply (e.g., closing date, method of payment), from
• Missing terms that go to the heart of the bargain (parties, property, price).

Courts prefer to enforce contracts where possible. They will:

• Construe ambiguous terms in a way that preserves the agreement, if a reasonable construction exists.
• Supply a reasonable time for performance if no closing date is stated.
• Fill minor gaps using default rules and common practice.

However, courts will not rewrite the parties’ deal. If it is impossible to tell:

• Who is bound,
• What land is being sold, or
• What the consideration is,

then the contract fails for indefiniteness or fails to satisfy the Statute of Frauds.

Worked Example 1.2

Seller and Buyer sign a writing that states: "Seller agrees to sell Buyer Blackacre at a price to be agreed in the future. Closing to occur in 60 days." Later, Buyer sues for specific performance, arguing that a court can supply a reasonable price. Is the contract enforceable?

Answer:
No. "Price to be agreed in the future" is an agreement to agree and is too indefinite for enforcement. A court will not rewrite the price term in this context, and the writing fails to state an essential term with reasonable certainty.

Statute of Frauds and Enforceability

A contract for the sale of land (and most other contracts creating an interest in land) must satisfy the Statute of Frauds. This generally requires:

• A writing, which can be one document or several related writings, that:
  • Reasonably identifies the subject matter (the property),
  • Indicates that a contract has been made between the parties, and
  • States with reasonable certainty the essential terms of the unperformed promises (typically parties, property, and price in land sale contracts).
• A signature by the party to be charged.

The writing does not have to be a formal contract. It could be:

• A signed letter confirming the deal.
• A check with notation on the memo line (if it identifies the deal and essential terms).
• An email chain that, taken together, shows the agreement and is authenticated by the party’s typed name.

If there is no sufficient writing, the land sale contract is normally unenforceable—unless an exception applies.

Key Term: Part Performance
An exception to the Statute of Frauds allowing enforcement of an oral real estate contract if the buyer has taken significant steps in reliance on the agreement, such as taking possession, making payment, or making substantial improvements.

Part Performance as a Statute of Frauds Exception

Most jurisdictions recognize an equitable exception that allows specific performance of an oral land sale contract if the buyer’s conduct clearly indicates the existence of such a contract. The usual test (often remembered as PIP) asks whether the buyer has done at least two of the following:

• Taken Possession of the land.
• Made Improvements that are substantial and not easily explained by a landlord-tenant relationship.
• Made Payment of all or a substantial part of the purchase price.

If these acts clearly relate to the alleged contract (and not just a lease or license), a court of equity may enforce the oral agreement despite the lack of a writing.

Note:

• Part performance typically supports specific performance, not necessarily money damages.
• Part performance by the seller is also relevant: full performance by the seller (actual conveyance by deed) will generally satisfy the Statute of Frauds for the buyer’s promise to pay.

Worked Example 1.3

Seller and Buyer agree orally that Seller will sell Buyer a specific parcel of land for $300,000. Buyer pays$50,000 as a deposit, takes possession, and starts building a fence. Seller then refuses to complete the sale, arguing the contract is unenforceable because it was not in writing. Can Buyer enforce the contract?

Answer:
Yes. Buyer can likely enforce the oral contract under the part performance exception. Buyer has taken possession, paid part of the price, and made improvements (the fence). These acts strongly indicate the existence of a land sale contract rather than a lease, so equity will typically grant specific performance despite the Statute of Frauds.

When Part Performance Is Not Enough

Not every act is sufficient. Paying a small deposit alone, or briefly moving materials onto the land, may not show the kind of reliance courts require.

Worked Example 1.4

Landowner and Buyer orally agree that Buyer will purchase a lot. Buyer pays a $2,000 deposit on a$400,000 price but has not taken possession or made improvements. Landowner later refuses to sell and raises the Statute of Frauds as a defense. Is the oral agreement enforceable?

Answer:
Probably not. Payment alone, especially a relatively small portion of the total price, is usually insufficient part performance. Without possession or improvements, most courts will not enforce the oral land sale contract.

Other Exceptions and Doctrines

In addition to part performance, some jurisdictions recognize:

• Equitable estoppel / detrimental reliance: If one party reasonably and foreseeably relies on the other’s promise to sign a written land contract, and substantial detriment results, a court may enforce the promise to avoid injustice.
• Full performance by one side: If a seller has already conveyed title (delivered a deed) in reliance on the oral promise of payment, courts usually treat the Statute of Frauds as satisfied.

These doctrines are less common than the PIP-style part performance fact patterns but can appear in MBE questions.

Timing and “Time Is of the Essence”

Real estate contracts often specify a closing date. If the contract simply states a date without more, courts usually treat that date as approximate; performance within a reasonable time is acceptable.

However, the parties can make timing critical.

Key Term: Time Is of the Essence
Language in a contract making timely performance a condition of the other party’s duty; failure to perform on time is then a material breach that may prevent the breaching party from enforcing the contract.

If the contract states that “time is of the essence” regarding closing or delivery of marketable title, failing to perform on the specified date is a serious breach and may allow the other party to rescind.

Time-related clauses are not essential terms for Statute of Frauds purposes, but they affect performance and breach, which are frequently tested alongside formation issues.

Contract Stage vs. Deed Stage

On the MBE, questions about essential terms typically arise at the contract stage, before closing. After closing:

• The contract merges into the deed (merger doctrine), and
• The deed, not the contract, controls the parties’ rights regarding title.

You should therefore separate:

• Questions about whether a land sale contract is enforceable (focus on essential terms and Statute of Frauds), from
• Questions about whether the deed validly conveys marketable title or contains effective covenants.

Key Term: Marketable Title
Title reasonably free from doubt and from defects that would expose the buyer to litigation; the seller is generally obligated to deliver marketable title at closing.

Marketable title is not an “essential term” in the contract formation sense, but the implied obligation to provide marketable title at closing is a background rule that often drives breach questions.

Worked Example 1.5

Seller emails Buyer: “I will sell you my house at 123 Main Street for $450,000, closing in 30 days. – Seller.” Buyer does not sign anything, but replies, “Sounds good. I accept.” Seller later refuses to go through with the sale, claiming the agreement is not enforceable because Buyer never signed. Can Buyer enforce the agreement?

Answer:
Yes. The Statute of Frauds requires a writing signed by the party to be charged—here, Seller, the party Buyer is suing. Seller’s signed email identifies the parties, describes the property with reasonable certainty, and states the price. Buyer’s lack of signature does not matter; Buyer can enforce the contract against Seller.

Exam Warning

The MBE commonly tests subtle defects in real estate contracts:

• A missing or ambiguous property description.
• A missing or indefinite price term.
• A signed writing that omits an essential term but is accompanied by acts of part performance.
• A writing signed by only one party.

When you see any of these, immediately ask:

1. Does the transaction involve an interest in land?
2. Is there a writing that satisfies the Statute of Frauds (parties, property, price, signature of party to be charged)?
3. If not, does an exception such as part performance or equitable estoppel apply?

Revision Tip

On MBE questions, if you see a real estate contract that is oral, unsigned by the party to be charged, or missing a key term such as the property description or price, consider whether:

• There is no enforceable contract because an essential term is missing or too vague, or
• The contract exists but fails the Statute of Frauds, and you must evaluate possible exceptions like part performance.

Carefully read each answer choice to see whether it focuses on lack of a contract, lack of a sufficient writing, or the applicability of an exception.

Key Point Checklist

This article has covered the following key knowledge points:

• A valid real estate contract must include the parties, property description, price (or definite price formula), and a signature by the party to be charged.
• The property must be described with reasonable certainty; vague references that could fit multiple parcels usually fail.
• The purchase price is generally an essential term; courts may sometimes supply a reasonable price, but for land sale contracts within the Statute of Frauds you should expect the writing to state the price or a definite formula.
• The Statute of Frauds requires a written, signed memorandum for contracts creating an interest in land; the writing must identify the subject property and state the essential terms with reasonable certainty.
• Missing or vague essential terms usually make the contract unenforceable, and courts will not rewrite the bargain; minor gaps such as closing date can be filled by default rules.
• Part performance—typically some combination of possession, payment, and improvements—can take an oral real estate contract out of the Statute of Frauds in equity.
• Time is not normally “of the essence” unless explicitly stated; a valid time-is-of-the-essence clause makes timely performance a condition.
• Only the party to be charged (or their authorized agent) must sign the writing; the other party can still enforce the agreement.
• After closing, the contract merges into the deed, and questions about marketable title are analyzed at the deed stage rather than under contract essential-terms rules.

Key Terms and Concepts

• Essential Terms
• Reasonable Certainty
• Statute of Frauds
• Part Performance
• Interest in Land
• Party to be Charged
• Time Is of the Essence
• Marketable Title