The Essential Terms of a Real Estate Contract

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What’s in an Agreement of Purchase and Sale?

Well many things... 29 clauses, plus whatever you’ve written on Schedule A, or B, or sometimes C.

There are agents who get a little too caught up in the "fill-in-the-blank" nature of the OREA Standard APS.

I get questions about whether a deal is enforceable because a trivial space was left blank or written incorrectly.

And to questions like this, I always frame it the same way...

You can sell a home on a napkin.

To be very clear, I do not recommend that. But I use that extreme example to remind them that the OREA Agreement is just a template.

There are a five (5) requirements for a real estate contract to be legally enforceable.

1) It must to be in writing.

The Statute of Frauds requires that agreements for land in Ontario must be in writing and signed by both parties. So verbal contracts for the sale of land are not binding in Ontario. 

Yes, there is case law from 2022 that technically challenges that, but that's a very specific fact pattern. The guiding principle is still that it must be in writing.

2) It must clearly identify the parties.

Full legal names of the buyer and seller. There should be no ambiguity about who is legally responsible for fulfilling the contract.

3) It must clearly identify the property.

Include the full and exact municipal address and legal description of the subject property. More specifically, it's important to describe any inclusions or exclusions, to prevent disputes - that's why there's a spot for this in the standard form.

4) It must include a price.

The contract needs to clearly state the purchase price or include a clear, agreed-upon method for calculating the price, such as an appraisal, to ensure both parties understand the financial terms and obligations of the agreement.

5) It must show an intent to convey (sell)

This is probably the most important component of a real estate contract.

It means the contract must explicitly indicate the seller’s intention to transfer ownership of the property to the buyer upon receipt of the agreed payment. It needs to show a clear commitment to transfer property rights.

Think about it... if you only looked at the first four requirements you could also be describing an appraisal.