Summary:
There are dozens of different agreements used in the real estate business...
Some memorialize agreements between the parties, while others are strictly drawn to document a non-binding understanding.
Some agreements are intended to become formal, binding contracts, and some are not. Some are provided for informational purposes only and should not be construed as binding contractual agreements.
Both types of agreements, when recorded, can create a “cloud on the title” of a specific property. This means that the property’s ownership may be encumbered or disputed due to the recorded agreement, which could potentially affect its marketability and value.
State and federal regulations require that certain agreements and contracts, such as deeds, leases, and mortgages, be drafted to memorialize the rights, obligations, and responsibilities in real estate transactions.
Article:
Contracts:
Contracts are specific agreements, usually in writing, executed by two or more parties that outline terms and conditions. These are enforceable in court, with the judge interpreting the contract in accordance with the rule of law. However, it’s essential to note that judges may interpret contracts differently, exhibiting subjectivity and deviating from the operation of the law. This can introduce a level of unpredictability in contract enforcement, potentially leading to disputes or unexpected outcomes.
Contracts require six elements:
Offer and acceptance.
Consideration, as in something of value.
Legal intent - must be for a lawful purpose.
Capacity- must be of age or mentally capable of understanding.
Intention - The parties must intend to enter into a legally binding contract.
Awareness- the parties must intend "a meeting of the minds” or mutuality.
Contracts may be verbal; only the enforceability and actual agreements are challenging to quantify.
Memorandum of agreement (MOA)
An MOA is a legally binding and enforceable contract that outlines a business relationship between parties to complete a mutually agreed-upon project. The agreement encompasses all the elements of a binding contract, establishing rights, obligations, duties, and legally enforceable remedies for non-compliance. The MOA contains the agreed-upon terms and outlines the steps to reach the desired goals.
The MOA will include:
Names of the parties involved.
Scope of work or tasks to be completed.
Financial obligations, if any.
Dates of agreement and projected terms to accomplish.
Key contacts.
Define the roles and responsibilities of the parties.
Length of the agreement
Modification and termination
Signatures of the parties.
https://www.imsa.edu/agreements-vs-contracts-what-is-the-difference/
https://legal.thomsonreuters.com/blog/agreement-vs-contract-the-differences/
Memorandum of Understanding (MOU)
An MOU is an agreement between parties that offers a flexible approach to outlining plans for mutual benefit and an action plan. This flexibility can be reassuring, allowing adjustments and modifications as the situation evolves and instilling confidence in the parties involved.
Under U.S. law, a Memorandum of Understanding (MOU) is similar to a letter of intent. It outlines the terms and conditions of the proposed loan but does not obligate anyone. In the context of real estate, a private money lender may issue a letter of interest or intent to make a loan, subject to the approval of the credit file and completion of the underwriting process for a fully documented loan file. This is a common practice in real estate transactions, where parties often want to outline their initial understanding before committing to a formal agreement.
https://www.investopedia.com/terms/m/mou.asp
https://en.wikipedia.org/wiki/Memorandum_of_understanding
For instance, a Memorandum of Agreement (MOA) can be used when two parties agree jointly to develop a property. In contrast, a Memorandum of Understanding (MOU) could be used when a buyer and seller agree on the general terms of a sale before a formal contract is drafted.
The document may be drafted based on the signatories’ intent and willingness to proceed with a formal contract. An example is a real estate purchaser’s desire to buy under specific pricing, terms, and conditions, subject to moving to the next step of a formal purchase agreement. The document will represent a starting point for negotiations to purchase the property.
Advantages and disadvantages of an MOA:
The advantage is that the MOA functions as an enforceable, binding contract. Wiggle room, memory lapses, intentional lying, and deception are limited to a finite condition. Then, again, back to the judge’s viewpoint, which is a crapshoot.