3.1 New Hampshire Contract Requirements
Key Takeaways
- New Hampshire's Statute of Frauds (RSA 506:1) requires contracts for the sale of land to be in writing and signed by the party to be charged.
- A valid contract needs five elements: offer, acceptance, consideration, legal capacity, and lawful objective; mutual assent is the "meeting of the minds."
- Earnest money must be deposited into the principal broker's escrow/trust account; commingling with operating or personal funds is a license-law violation.
- Most NH licensees use New Hampshire Association of REALTORS (NHAR) standard forms, including the Purchase and Sale Agreement with financing, inspection, and title contingencies.
- "Time is of the essence" makes every contract deadline strictly binding; missing a date can be a breach and forfeit the deposit.
Why Contracts Dominate the State Exam
The New Hampshire salesperson exam is administered by PSI: 120 scored questions (80 national, 40 NH-state), a 240-minute time limit, and a passing standard of 70% on each portion separately (56/80 national and 28/40 state). Contract law shows up on both halves, so master the common-law rules and the NH twists.
The Five Elements of a Valid Contract
A real estate contract is only enforceable if every element below is present. Memorize them as a checklist:
| Element | What it means | Common exam trap |
|---|---|---|
| Offer | A definite proposal with clear terms (price, parties, property) | An advertisement is an invitation to offer, not an offer |
| Acceptance | Unqualified "yes" to the exact terms | A counteroffer rejects and replaces the original offer |
| Consideration | Something of value exchanged (usually money) | A promise to make a gift is not consideration |
| Legal capacity | Parties are of sound mind and legal age (18 in NH) | A minor's contract is voidable by the minor, not void |
| Lawful objective | Purpose must be legal | A contract to violate fair-housing law is void |
Together, offer + acceptance create mutual assent, the "meeting of the minds."
The Statute of Frauds (RSA 506:1)
Under New Hampshire's Statute of Frauds, any contract for the sale of land or an interest in land must be (1) in writing and (2) signed by the party to be charged (the person you are trying to enforce it against) or their authorized agent.
- Oral agreements to buy or sell real estate are generally unenforceable.
- Leases for more than one year must also be written.
- The NH Uniform Electronic Transactions Act (RSA 294-E) validates e-signatures and emailed agreements, so a digitally signed Purchase and Sale Agreement satisfies the writing requirement.
Standard NHAR Forms
Most licensees use New Hampshire Association of REALTORS (NHAR) standardized forms rather than drafting from scratch:
| Form | Primary use |
|---|---|
| Purchase and Sale (P&S) Agreement | Residential sale; the core contract |
| Listing Agreement | Seller representation (exclusive-right-to-sell is most common) |
| Buyer Agency Agreement | Buyer representation |
| Lead Paint & Property Disclosures | Mandatory disclosures attached to the P&S |
Worked example
A buyer offers $410,000 with a $10,000 deposit and a 30-day financing contingency. The seller crosses out $410,000, writes $415,000, and signs. This is a counteroffer: the original offer is dead, and no contract exists until the buyer accepts the $415,000 term. If the buyer instead finds a better house and walks away, no contract was formed, so the deposit (if any) is returned.
Earnest Money and the Broker's Trust Account
Earnest money (a good-faith deposit) signals the buyer is serious. New Hampshire license law controls exactly how it is handled, and these rules are heavily tested.
| Requirement | Rule |
|---|---|
| Who holds it | The principal broker, not the salesperson |
| Where it goes | A separate escrow/trust account at an NH financial institution |
| Commingling | Prohibited — never mix client funds with operating or personal money |
| Timing | Deposited promptly per the contract terms after acceptance |
| Interest | Allowed only if agreed in writing; absent agreement, it follows the deposit |
Mishandling deposits (commingling, late deposit, or "borrowing" from the trust account, called conversion) is one of the fastest routes to license discipline by the New Hampshire Real Estate Commission (NHREC).
Contingencies: Built-In Exits
A contingency is a condition that must be met or the contract can be canceled, usually with the deposit returned. Know the four big ones:
- Financing contingency — buyer may cancel if a loan is not approved by the stated deadline; a lender denial letter is typical proof.
- Inspection contingency — buyer may inspect and then accept, request repairs/credits, or cancel within the inspection period.
- Appraisal contingency — if the property appraises below the price, the buyer can renegotiate, pay the gap, or cancel.
- Title contingency — seller must deliver marketable title; defects must be cured before closing.
Default, Remedies, and Termination
When a party fails to perform, the non-breaching party has remedies:
| Remedy | Who uses it | Effect |
|---|---|---|
| Liquidated damages | Seller | Keeps the earnest money as the agreed remedy |
| Specific performance | Buyer | Court orders the seller to convey because land is unique |
| Rescission | Either | Contract canceled; parties returned to pre-contract position |
| Compensatory damages | Either | Money to cover actual proven losses |
Contracts also end by performance (closing), mutual agreement, or a contingency failing.
Time Is of the Essence
NH P&S agreements typically state "time is of the essence," making every deadline strictly enforceable. Missing the financing deadline by even one day can be a material breach. Extensions must be in writing and signed — an oral "sure, take a few more days" is unenforceable under the Statute of Frauds.
Common traps
- An executory contract is signed but not yet closed; an executed contract is fully performed.
- A voidable contract (e.g., signed by a minor or under duress) is valid until the protected party disaffirms; a void contract never had legal effect.
- Earnest money is not required for a contract to be valid — consideration can be the mutual promises themselves.
Under New Hampshire's Statute of Frauds (RSA 506:1), which statement is TRUE about real estate contracts?
A salesperson receives a buyer's $8,000 earnest money check. How must it be handled under NH license law?
A seller crosses out the buyer's $410,000 offer, writes $415,000, and signs. What is the legal effect?