3.1 Maine Contract Requirements
Key Takeaways
- Maine's Statute of Frauds (Title 33) requires real estate sale contracts to be in writing and signed by the party to be charged; oral agreements are unenforceable.
- A valid contract needs offer, acceptance, consideration, legal capacity, lawful purpose, and a legal description of the property.
- Earnest money must go into the designated broker's trust account, not a salesperson's or personal account, per the timeline stated in the contract.
- Financing, inspection, and appraisal contingencies create lawful exit rights; missing a 'time is of the essence' deadline can be a breach.
- Maine winter realities (heating oil, propane, snow, frozen pipes) drive special clauses on fuel credits and possession timing.
Why Contracts Dominate the State Exam
The Maine licensing exam is delivered by Pearson VUE in two parts: a national portion (80 questions, 2.5 hours) and a state-law portion (40 questions, 1.5 hours), for 120 questions and 4 hours total. You need a scaled score of 75 on each part, reported on a 0–100 scale—not a raw percentage. Contract law spans both parts, so memorize the rules precisely.
Statute of Frauds
Under Maine's Statute of Frauds (Title 33), a contract for the sale of an interest in real property must be in writing and signed by the party to be charged (the person you are trying to enforce it against) or an authorized agent.
Key Point: An oral promise to sell real estate is generally unenforceable, even with witnesses. A handshake deal on a $300,000 cottage is not a contract.
Limited exceptions exist (e.g., part performance—a buyer who takes possession and makes improvements may enforce an oral deal), but the exam answer is: real estate contracts must be written.
The Six Essential Elements
| Element | What It Means | Exam Trap |
|---|---|---|
| Offer | Definite terms (price, parties, property) | An invitation to negotiate is not an offer |
| Acceptance | Unequivocal "yes" to the exact terms | Any change = a counteroffer, killing the original offer |
| Consideration | Value exchanged (usually money) | "Love and affection" is past consideration, not valid |
| Legal capacity | Sound mind, legal age (18 in Maine) | Minors' contracts are voidable |
| Lawful purpose | Legal objective | An illegal contract is void, not voidable |
| Legal description | Property adequately identified | A street address may be enough for a P&S; a deed needs a metes-and-bounds or recorded-plat reference |
Offer, Counteroffer, and Acceptance
A counteroffer rejects and extinguishes the original offer—the original cannot later be "snapped up." Acceptance must be communicated to the offeror within any stated deadline. Until acceptance is communicated and the document signed by both parties, either side may revoke.
Earnest Money and the Trust Account
Earnest money (a good-faith deposit) signals serious intent and becomes part of the down payment at closing.
| Requirement | Rule |
|---|---|
| Where it goes | The designated broker's trust (escrow) account |
| Who may hold it | The designated broker, never a salesperson personally |
| Deposit timeline | As the contract states (commonly within 3 business days of acceptance) |
| Commingling | Prohibited—mixing client funds with brokerage operating funds violates license law |
| Disputed funds | Held until the parties agree in writing or a court/mediator directs release |
Worked example: A buyer wires $5,000 earnest money. The salesperson must promptly turn it over to the designated broker, who deposits it in the firm's trust account. If the deal later collapses over a financing-contingency dispute, the broker holds the funds until both parties sign a release—the broker does not pick a winner.
The Three Core Contingencies
Contingencies are conditions that must be satisfied or the contract can be canceled with the earnest money returned (per its terms). Read deadlines carefully.
Financing Contingency
| Element | Detail |
|---|---|
| Purpose | Buyer may cancel if a loan is denied |
| Buyer duty | Apply for financing within a set number of days (often 7–10) |
| Proof | Lender denial letter usually required |
| Typical window | 30–45 days to clear |
Inspection Contingency
| Element | Detail |
|---|---|
| Purpose | Buyer inspects and may negotiate repairs |
| Window | Commonly 10–14 days |
| Buyer options | Accept as-is, request repairs/credits, or cancel |
Appraisal Contingency
| Element | Detail |
|---|---|
| Purpose | Protects the buyer (and lender) if value comes in low |
| Options if low | Seller drops price, buyer pays the gap in cash, or contract is canceled |
| Lender link | The lender lends on the lower of price or appraised value |
Worked example: Price is $250,000; appraisal returns $240,000. With an appraisal contingency, the buyer can demand a $10,000 price cut, bring $10,000 extra cash, or walk. Without the contingency, the buyer must cover the $10,000 gap or risk default.
Termination of Contracts
- Performance – both sides perform; the contract is discharged.
- Mutual rescission – both agree in writing to cancel.
- Contingency failure – a stated condition is not met.
- Breach – one party fails to perform; remedies include forfeiture of earnest money, specific performance (a court order to convey, available because land is unique), or money damages.
- Impossibility – e.g., the house burns down before closing.
Time Is of the Essence
Most Maine purchase and sale agreements include a "time is of the essence" clause:
- Deadlines are strict and enforceable.
- Missing a deadline (closing date, inspection cutoff) can be a material breach.
- Extensions require a written, signed amendment—not a verbal okay.
Maine-Specific Clauses
Maine's climate and rural housing stock generate clauses you will see on the state portion:
| Issue | Common Provision |
|---|---|
| Heating oil / propane | Buyer reimburses seller for fuel left in the tank at closing, measured by a fuel reading |
| Winter possession | Possession timing tied to plowed access and utilities being on |
| Frozen / shut-down systems | If a seasonal camp's water is winterized, inspection terms address de-winterizing |
| Septic and well | Inspection/test contingencies for properties off public water and sewer |
| Radon | Buyer may add a radon test contingency with a 4.0 pCi/L action level |
A buyer makes a written offer; the seller crosses out the price, writes a higher number, signs, and returns it. What is the legal status of the original offer?
Earnest money in a Maine transaction must be held by whom and where?