3.1 Connecticut Contract Requirements
Key Takeaways
- The Statute of Frauds (Conn. Gen. Stat. § 52-550) requires real estate sales contracts to be in writing and signed by the party to be charged.
- Every valid contract needs five elements: offer, acceptance, consideration, legal capacity, and lawful purpose.
- A real estate broker must deposit escrow funds promptly and keep them in a separate clientele/escrow account per Conn. Gen. Stat. § 20-324k.
- Connecticut transactions are attorney-driven; closings are typically conducted by a licensed Connecticut attorney, not an escrow company.
- Contingencies (financing, inspection, appraisal, home-sale) are the buyer's exit ramps, and 'time is of the essence' makes their deadlines hard.
Why Contract Law Dominates the Exam
The Connecticut salesperson and broker exams (administered by PSI for the state) lean heavily on contract concepts because a real estate license is, functionally, a license to help others form binding contracts. Expect roughly 8 questions on the state-law portion and many more on the national portion to test the elements of a contract, the Statute of Frauds, and how earnest money is handled. Memorize the rules below cold.
The Statute of Frauds
Connecticut's Statute of Frauds, codified at Conn. Gen. Stat. § 52-550, requires that any agreement "for the sale of real property or any interest in or concerning real property" be:
- In writing, and
- Signed by the party to be charged (the person you are trying to hold to the deal) or their lawfully authorized agent.
Key Point: An oral promise to sell land is generally unenforceable. A handshake deal at $400,000 means nothing if the seller backs out — there is no signed writing to enforce. A lease longer than one year also falls under the statute and must be written.
The Five Essential Elements
| Element | What it means | Common exam trap |
|---|---|---|
| Offer | Definite terms communicated with intent to be bound | An ad or listing is an invitation to offer, not an offer |
| Acceptance | Unequivocal "yes" to the exact terms | A counteroffer rejects and terminates the original offer |
| Consideration | Bargained-for value (usually money) | Earnest money is evidence of consideration, not the consideration itself |
| Legal capacity | Parties are of age (18+) and mentally competent | A minor's contract is voidable by the minor |
| Lawful purpose | The objective is legal | A contract to sell for a discriminatory purpose is void |
Void, Voidable, and Unenforceable
The exam loves these distinctions:
- Void — no legal effect from the start (e.g., illegal purpose).
- Voidable — valid until a party with the power to cancel does so (e.g., a contract signed under duress or by a minor).
- Unenforceable — otherwise valid but the courts will not enforce it (e.g., an oral land-sale contract barred by the Statute of Frauds).
Executed vs. Executory
An executory contract is signed but not yet fully performed — a purchase agreement before closing. An executed contract has had all terms performed — after the deed is delivered and money paid. Do not confuse "executed" (performed) with merely "signed."
Earnest Money and Escrow Duties
Earnest money (a good-faith deposit) demonstrates the buyer's serious intent. Connecticut law imposes strict handling rules on the broker, not the salesperson.
| Requirement | Rule |
|---|---|
| Who holds it | The broker (the listing or designated broker), never the individual salesperson |
| Where it goes | A separate escrow / clients' funds account, kept apart from the broker's operating money (Conn. Gen. Stat. § 20-324k) |
| Commingling | Strictly prohibited — mixing client funds with brokerage funds can cost a license |
| Conversion | Using client funds for the broker's own purposes is a serious violation |
| Disbursement | Only per the contract terms or written mutual instructions; if buyer and seller dispute, the broker holds until resolved or interpleads |
Typical earnest deposits run 1–3% of the price in standard markets and higher in competitive bidding, but the dollar figure is whatever the contract states.
The Connecticut Attorney-Closing Practice
Connecticut is an attorney-closing state. Unlike states that use escrow/title companies to conduct settlement, a licensed Connecticut attorney typically prepares the closing documents, certifies title, and disburses funds. Practical exam implications:
- Buyers and sellers each commonly retain their own attorney.
- The buyer's attorney usually records the deed and the lender's mortgage.
- Many purchase agreements still contain an attorney-approval/review clause (often 3–5 business days) letting either side's lawyer review and propose changes — though Connecticut's practice is less rigidly tied to a statutory review window than New Jersey's.
Contingencies: The Buyer's Exit Ramps
| Contingency | Protects buyer if... | Typical window |
|---|---|---|
| Financing (mortgage) | Loan is not approved | Apply within a set number of days; commitment by a stated date |
| Inspection | Material defects are found | 7–14 days to inspect, then accept, renegotiate, or cancel |
| Appraisal | Property appraises below price | Seller drops price, buyer pays the gap, or buyer cancels |
| Home-sale | Buyer's current home does not sell | Seller may add a kick-out clause to keep marketing |
Time Is of the Essence
When a contract states "time is of the essence," every deadline becomes a strict, material term. Missing it can be a breach that lets the other party cancel or sue. Extensions must be in writing and signed — an email "sure, take another week" without the proper signatures may not hold up.
Exam Tip: If a buyer fails to apply for financing by the contingency deadline in a "time is of the essence" contract, the buyer may lose the right to use the financing contingency and could forfeit the deposit.
A buyer and seller verbally agree on a $425,000 home sale and shake hands, but nothing is signed. The seller later accepts a higher offer. Under Connecticut law, the first buyer's position is:
Which party is legally responsible for depositing and holding a buyer's earnest money in a Connecticut transaction?
A purchase contract states 'time is of the essence.' The buyer misses the financing-application deadline by three days. The most accurate consequence is: