Key Takeaways
- Arkansas follows the Statute of Frauds requiring real estate contracts to be in writing
- Valid contracts require offer, acceptance, consideration, legal capacity, and lawful purpose
- Earnest money should be deposited into the broker's trust account within specified timeframes
- Arkansas uses standardized contract forms prepared by the Arkansas Realtors Association
- Contingencies (financing, inspection, appraisal) must be clearly specified in the contract
Arkansas Contract Requirements
Arkansas real estate contracts must meet specific legal requirements to be valid and enforceable.
Statute of Frauds
Under Arkansas's Statute of Frauds, contracts for the sale of real property must be:
- In writing
- Signed by the party to be charged (or their authorized agent)
Key Point: Oral agreements to sell real estate are generally unenforceable in Arkansas.
Essential Elements of a Valid Contract
| Element | Description |
|---|---|
| Offer | Clear proposal with definite terms |
| Acceptance | Unequivocal agreement to the offer's terms |
| Consideration | Something of value exchanged (usually money) |
| Legal capacity | Parties must be competent to contract |
| Lawful purpose | Contract cannot be for illegal purposes |
| In writing | Required for real estate contracts |
Common Contract Forms
Arkansas real estate professionals typically use:
| Form | Use |
|---|---|
| Arkansas Residential Contract | Standard purchase agreement |
| Commercial Contract | Business property transactions |
| Lease Agreement | Rental property |
| Listing Agreement | Seller representation |
| Buyer Agency Agreement | Buyer representation |
Note: The Arkansas Realtors Association provides standardized forms used by most licensees.
Earnest Money
Earnest money (also called a good faith deposit) shows the buyer's serious intent:
Handling Requirements
| Requirement | Details |
|---|---|
| Deposit timeline | As specified in contract (typically within 3 business days) |
| Where deposited | Broker's trust account |
| Who holds | Broker (not salesperson) |
| Disbursement | Per contract terms or mutual agreement |
Common Contract Contingencies
Contingencies allow parties to exit the contract if certain conditions aren't met:
Financing Contingency
| Element | Details |
|---|---|
| Purpose | Buyer can cancel if financing not obtained |
| Deadline | Must apply for loan within specified days |
| Documentation | May require denial letter from lender |
Inspection Contingency
| Element | Details |
|---|---|
| Purpose | Buyer can inspect property and negotiate repairs |
| Timeline | Inspection period specified in contract |
| Options | Accept, negotiate repairs, or cancel |
Appraisal Contingency
| Element | Details |
|---|---|
| Purpose | Protects buyer if property appraises below price |
| Options | Seller reduce price, buyer pay difference, or cancel |
Termination of Contracts
Contracts may be terminated by:
| Method | Description |
|---|---|
| Performance | Both parties fulfill obligations |
| Mutual agreement | Both parties agree to cancel |
| Contingency not met | Condition specified in contract fails |
| Breach | One party fails to perform |
| Impossibility | Performance becomes impossible |
Time is of the Essence
Many Arkansas real estate contracts include a "time is of the essence" clause:
- Deadlines are strict and legally binding
- Missing a deadline may constitute breach
- Extensions require written agreement
Exam Tip: Understand the difference between an executory contract (not yet performed) and an executed contract (fully performed).
Option Contracts
An option gives a buyer the right (not obligation) to purchase:
| Element | Description |
|---|---|
| Option fee | Buyer pays for the right to purchase |
| Time period | Buyer has specified time to exercise option |
| Exercise | Buyer must exercise by deadline or lose option |
| Non-refundable | Option fee typically not returned if not exercised |
Under Arkansas's Statute of Frauds, which statement is TRUE about real estate contracts?
Where should earnest money be deposited in an Arkansas real estate transaction?