James and Linda enter into a written agreement in California where James will sell Linda his rental property for $680,000. The agreement contains all essential terms but neither party has yet performed. James receives a higher offer and wants to back out. He argues the contract lacks consideration because Linda has not yet paid anything. Under California law, is James correct?
Correct Answer
B) No, because Linda's promise to pay the purchase price constitutes valid consideration under California law
Under California Civil Code §1605-1615, consideration can be a promise, act, or forbearance. In a bilateral real estate contract, Linda's promise to pay $680,000 in exchange for James's promise to convey title constitutes valid mutual consideration. Actual payment is not required at the time of contract formation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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