Tom is a buyer's broker in Colorado. His client makes an offer on a property. The seller makes a counteroffer changing the closing date. Tom's client verbally tells Tom to accept the counteroffer but does not sign anything. Tom, believing he has authority, signs the counteroffer acceptance on behalf of his client. Which of the following best describes the legal consequence?
Correct Answer
C) The contract is not binding because a broker cannot sign a purchase contract on behalf of a client without written authorization
In Colorado, a real estate broker does not have authority to sign a purchase contract on behalf of a client without explicit written authorization (such as a power of attorney). The buyer must personally sign the contract for it to be binding. Tom's signature without written authorization from his client does not create a valid, enforceable contract, regardless of the buyer's verbal instruction.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
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- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
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