Lesson 2: Contracts Used in Real Estate
Practice (Louisiana)
Listing Agreement - ANS-This is an employment contract; a contract in which the Seller agrees
to pay a commission to broker and, in exchange broker agrees to attempt to find someone to
purchase owner's property upon the Seller's terms. The Agreement typically contains the
amount of the commission, the term of the contract and the terms of the sale.
Buyer Agency Agreements. - ANS-Agreement between broker and Buyer) Buyer contracts with
broker for broker to seek to find property for Buyer to buy. Whether or not a commission will be
paid depends on the agreement, as there is no general practice.
Mandate (Power of Attorney). - ANS-Unlike an agent who receives compensation for his
services, a mandatary may or may not receive anything of value for his services. That is to be
determined solely by the contract.
1. Letters of Intent (LOI). - ANS-a. LOIs are not intended to be binding contracts. These letters
are most often used in the negotiation stage as an expression of interest. In fact, if written
correctly, the point is to prevent a letter of intent from becoming enforceable.
b. Letters of intent are not specifically recognized in Louisiana and there is little case law
concerning their use. However, case law from other states suggest that LOIs will be deemed
binding if all of the requirements of a contract are found. Factors that courts look at in finding an
enforceable contract include:
Loi notes continued - ANS-(i) LOI contains all material terms (i.e., price, property description,
closing date).
(ii) LOI obligates parties to execute a subsequent agreement.
(iii) LOI includes references from which a court can determine the material terms.
(iv) Part performance evidences the parties' agreement to be bound by the terms of the LOI.
(v) LOI contains terms that prove intent of parties to be bound. (David C. Camp et.al., Letters of
Intent in Sale Transactions and Loan Commitments, Practicing Law Institute, Real Estate Law
and Practice Course Handbook Series, 468 PLI/Real 627.)
.
, 1. Letters of Intent (LOI) - Continued - ANS-Factors often used by courts to indicate the intent
not to be bound:
(i) Nature of the LOI itself makes letter non-binding.
(ii) LOI is not sufficiently specific to be binding (e.g., essential terms not included).
(iii) Specific language disavowing enforceability.
(iv) Conduct of the parties after signing the LOI reflect no intent to be bound.
Purchase Agreements. - ANS-a. Placed in context, the Purchase Agreement (or Agreement to
Purchase and Sell) is an agreement between the Buyer and the Seller to sell and buy. While
there are many rules in the Civil Code specific to Sales, the general rules regarding contracts
also apply.
The Code Definition is: - ANS-"An agreement whereby one party promises to sell and the other
promises to buy a thing at a later time, or upon the happening of a condition, or upon
performance of some obligation by either party, is a bilateral promise of sale or contract to sell.
Such an agreement gives either party the right to demand specific performance.
A contract to sell must set forth the thing and the price, and meet the formal requirements of the
sale it contemplates." La. C.C. art. 2623.
Elements to be Included or Considered in a Purchase Agreement. - ANS-a. Actions necessary
to satisfy the condition. (Example - property must be rezoned from residential to commercial.)
b. Time frame within which to perform. (Example - before the expiration of the Inspection
period.)
c. Any costs involved, who is responsible for payment. (Example - Buyer shall be responsible for
all cost involved in rezoning the property. Seller shall cooperate by signing any required
applications; however, Seller shall not be obligated to expend any money in connection with
rezoning.)
d. Other typical conditions:
(i) Prior years taxes must be paid.
(ii) Prior mortgages must be cancelled.
(iii) Satisfaction of inspections.
(iv) Other "escape" clauses.
Practice (Louisiana)
Listing Agreement - ANS-This is an employment contract; a contract in which the Seller agrees
to pay a commission to broker and, in exchange broker agrees to attempt to find someone to
purchase owner's property upon the Seller's terms. The Agreement typically contains the
amount of the commission, the term of the contract and the terms of the sale.
Buyer Agency Agreements. - ANS-Agreement between broker and Buyer) Buyer contracts with
broker for broker to seek to find property for Buyer to buy. Whether or not a commission will be
paid depends on the agreement, as there is no general practice.
Mandate (Power of Attorney). - ANS-Unlike an agent who receives compensation for his
services, a mandatary may or may not receive anything of value for his services. That is to be
determined solely by the contract.
1. Letters of Intent (LOI). - ANS-a. LOIs are not intended to be binding contracts. These letters
are most often used in the negotiation stage as an expression of interest. In fact, if written
correctly, the point is to prevent a letter of intent from becoming enforceable.
b. Letters of intent are not specifically recognized in Louisiana and there is little case law
concerning their use. However, case law from other states suggest that LOIs will be deemed
binding if all of the requirements of a contract are found. Factors that courts look at in finding an
enforceable contract include:
Loi notes continued - ANS-(i) LOI contains all material terms (i.e., price, property description,
closing date).
(ii) LOI obligates parties to execute a subsequent agreement.
(iii) LOI includes references from which a court can determine the material terms.
(iv) Part performance evidences the parties' agreement to be bound by the terms of the LOI.
(v) LOI contains terms that prove intent of parties to be bound. (David C. Camp et.al., Letters of
Intent in Sale Transactions and Loan Commitments, Practicing Law Institute, Real Estate Law
and Practice Course Handbook Series, 468 PLI/Real 627.)
.
, 1. Letters of Intent (LOI) - Continued - ANS-Factors often used by courts to indicate the intent
not to be bound:
(i) Nature of the LOI itself makes letter non-binding.
(ii) LOI is not sufficiently specific to be binding (e.g., essential terms not included).
(iii) Specific language disavowing enforceability.
(iv) Conduct of the parties after signing the LOI reflect no intent to be bound.
Purchase Agreements. - ANS-a. Placed in context, the Purchase Agreement (or Agreement to
Purchase and Sell) is an agreement between the Buyer and the Seller to sell and buy. While
there are many rules in the Civil Code specific to Sales, the general rules regarding contracts
also apply.
The Code Definition is: - ANS-"An agreement whereby one party promises to sell and the other
promises to buy a thing at a later time, or upon the happening of a condition, or upon
performance of some obligation by either party, is a bilateral promise of sale or contract to sell.
Such an agreement gives either party the right to demand specific performance.
A contract to sell must set forth the thing and the price, and meet the formal requirements of the
sale it contemplates." La. C.C. art. 2623.
Elements to be Included or Considered in a Purchase Agreement. - ANS-a. Actions necessary
to satisfy the condition. (Example - property must be rezoned from residential to commercial.)
b. Time frame within which to perform. (Example - before the expiration of the Inspection
period.)
c. Any costs involved, who is responsible for payment. (Example - Buyer shall be responsible for
all cost involved in rezoning the property. Seller shall cooperate by signing any required
applications; however, Seller shall not be obligated to expend any money in connection with
rezoning.)
d. Other typical conditions:
(i) Prior years taxes must be paid.
(ii) Prior mortgages must be cancelled.
(iii) Satisfaction of inspections.
(iv) Other "escape" clauses.
