Signed but backed out with no consideration

[smutlydog]

Texas
I am a new home builder with 3 houses completed so far. For the first time I was going to custom build a house for someone. The buyer told us he was approved for x amount dollars. My son and I didn't really understand how it worked. After budgeting we realized the profit margin was too low and the way it works we would be obligated to a set price. So after signing the contract for purchase of land I wanted out of the deal. I had not given anything of values, so no contract right? The broken told me he was ok with me backing out but if he and seller of the land wanted to they could sue me. Is that true? I think he is just trying to me feel like he is giving me something. He lists my homes, so he makes good money off me.

 

[FlyingRon]

You needed a lawyer before you started this and you need one now. It is not necessary for you to have actually receive anything to have a valid contract. The promise to pay you in exchange for your promise to do some work is consideration.

 

[quincy]

Texas
I am a new home builder with 3 houses completed so far. For the first time I was going to custom build a house for someone. The buyer told us he was approved for x amount dollars. My son and I didn't really understand how it worked. After budgeting we realized the profit margin was too low and the way it works we would be obligated to a set price. So after signing the contract for purchase of land I wanted out of the deal. I had not given anything of values, so no contract right? The broken told me he was ok with me backing out but if he and seller of the land wanted to they could sue me. Is that true? I think he is just trying to me feel like he is giving me something. He lists my homes, so he makes good money off me.

Yes. The seller of the land with whom you signed an offer to purchase could sue you for failing to honor the purchase agreement. The one with whom you contracted to build a house on this land could also have a claim against you to pursue.

I agree with FlyingRon. You need to see an attorney in your area for a personal review.

 

[adjusterjack]

My son and I didn't really understand how it worked.

Yeah, I can tell.

Lawyer time.

 

[quincy]

smutlydog is a longtime member with an interesting posting history.

 

[Taxing Matters]

I had not given anything of values, so no contract right?

No, not correct. In contract law, consideration means that each party to the deal is getting something from the other. In your contract, your consideration was your promise to build the house for $X and the buyer's consideration is the promise to pay the $X for the house. You are each going to get something from the other out the deal — you the money, the buyer gets the house. So you had consideration here. Whether there is some other defect that would cause the contract to fail I cannot say as I don't know all the details of it. Note that Texas law also provides an unusual rule that in contract disputes the winner pays the loser's legal fees unless the contract says otherwise. Most other states use the opposite rule that the loser only pays the winner's legal fees if the contract specifically states that. What this means is that if your contract didn't address the issue of legal fees then if the buyer sues for breach of contract and wins, you not only pay damages for the breach but also end up paying the buyer's legal fees, too.

I suggest you not only consult a contract attorney about this particular problem but also get help understanding how contract law works and help with drafting your future contracts. If you are going to be building homes, you need to get this right or it can really cost you.

 

[quincy]

I see a problem with the land purchase if this particular plot of land was specifically chosen by the one(s) who contracted for the house. That, of course, is just one problem.

 

[smutlydog]

No, not correct. In contract law, consideration means that each party to the deal is getting something from the other. In your contract, your consideration was your promise to build the house for $X and the buyer's consideration is the promise to pay the $X for the house. You are each going to get something from the other out the deal — you the money, the buyer gets the house. So you had consideration here. Whether there is some other defect that would cause the contract to fail I cannot say as I don't know all the details of it. Note that Texas law also provides an unusual rule that in contract disputes the winner pays the loser's legal fees unless the contract says otherwise. Most other states use the opposite rule that the loser only pays the winner's legal fees if the contract specifically states that. What this means is that if your contract didn't address the issue of legal fees then if the buyer sues for breach of contract and wins, you not only pay damages for the breach but also end up paying the buyer's legal fees, too.

I suggest you not only consult a contract attorney about this particular problem but also get help understanding how contract law works and help with drafting your future contracts. If you are going to be building homes, you need to get this right or it can really cost you.

So the promise is consideration? The broker said we are fine but if not I will just buy the lot and build the house for the $20,000 or possibly a little less profit. In the future I will not get involved in a project like this. It has to be either entirely my project or entirely someone else's financing.

 

[smutlydog]

I see a problem with the land purchase if this particular plot of land was specifically chosen by the one(s) who contracted for the house. That, of course, is just one problem.

My broker found the lot for me.

 

[quincy]

My broker found the lot for me.

Was the lot chosen by the broker who was working with the ones who wanted to have a house built?

I think you will be smart to avoid transactions like this in the future, until you have a better understanding of the business.

 

[zddoodah]

So after signing the contract for purchase of land I wanted out of the deal. I had not given anything of values, so no contract right?

No. A contract is valid if supported by consideration. Consideration is something of value or the promise to give something of value or refraining from doing something or the promise to so refrain.

The broken told me he was ok with me backing out but if he and seller of the land wanted to they could sue me. Is that true?

"The broken"??? In any event, anyone can sue anyone for anything.

You needed a lawyer before you started this and you need one now.

Concur.

The broker said we are fine

Is this broker a lawyer?

 

[smutlydog]

No. A contract is valid if supported by consideration. Consideration is something of value or the promise to give something of value or refraining from doing something or the promise to so refrain.



"The broken"??? In any event, anyone can sue anyone for anything.



Concur.



Is this broker a lawyer?

He didn't mean technically fine. My broker knows the sellers broker, and he said this is almost a normal part of doing business. No one gets too exited until monies are transferred, but I now get it. It doesn't reflect well on me. So I assume all I have to do is agree to build if I am threatened with a lawsuit, and I am good. Correct?

 

[quincy]

He didn't mean technically fine. My broker knows the sellers broker, and he said this is almost a normal part of doing business. No one gets too exited until monies are transferred, but I now get it. It doesn't reflect well on me. So I assume all I have to do is agree to build if I am threatened with a lawsuit, and I am good. Correct?

You really should discuss this with a lawyer in your area. You want to avoid a lawsuit.

 

[smutlydog]

I made the decision to go forward with building the house. That's actually the easiest way out of this headache.

 

[PayrollHRGuy]

I made the decision to go forward with building the house. That's actually the easiest way out of this headache.

Live and learn. I'd strongly suggest that in the future you not only have a lawyer look over your contracts before they are signed but work on your bidding skills.

How did you discover you under bid and what have you done to make sure it never happens again?