3.1 Vermont Contract Requirements

How Vermont Treats Real Estate Contracts

A real estate contract is a legally enforceable promise to convey an interest in land. The salesperson exam tests two layers: the common-law elements every contract needs, and the Vermont-specific rules layered on top — especially the Statute of Frauds and the broker's earnest-money duty under 26 V.S.A. § 2214 (Vermont Statutes Annotated, Title 26).

Statute of Frauds

Vermont's Statute of Frauds requires that any contract for the sale of real property (or an interest in land lasting more than one year, including most leases) be in writing and signed by the party to be charged — the person the contract is being enforced against, or their authorized agent. An oral promise to sell a farm in Addison County, no matter how many witnesses heard it, is generally unenforceable.

Trap: "Signed by the party to be charged" does NOT mean both parties must sign every copy. To enforce a contract against the seller, you need the seller's signature; the buyer's signature is what binds the buyer.

The Five Elements of a Valid Contract

Change any term during acceptance — even the closing date — and you have a counteroffer, which kills the original offer. The original offeror is now the offeree and is free to reject.

Voidable vs. Void vs. Unenforceable

• Void — no contract ever existed (illegal purpose).
• Voidable — valid until one party elects to cancel (minor, fraud, duress).
• Unenforceable — valid in form but a court won't enforce it (fails the Statute of Frauds, or the claim is time-barred).

Earnest Money and the Broker's Trust Account

Earnest money is a good-faith deposit signaling the buyer's serious intent. It is NOT consideration for the contract (the mutual promises are), and it is NOT a down payment — though at closing it is usually credited toward the purchase price.

The Five-Banking-Day Rule (26 V.S.A. § 2214)

Vermont statute requires that within five banking days a broker deposit all earnest money and contract deposits into a trust or escrow account at a financial institution licensed in Vermont. Key handling points the exam loves:

If the parties don't agree otherwise in writing, interest earned follows the deposit: applied to the price if the sale closes, returned to the buyer if the deposit is refunded, or paid to the seller if the buyer defaults.

Worked example: A buyer's $10,000 check is accepted on a Friday. Saturday and Sunday don't count. The broker must deposit it by the end of the fifth following banking day — not five calendar days. Holding it in a desk drawer "until inspection" is a violation even if the buyer never complains.

Standard Forms

Vermont practitioners typically work from Vermont REALTORS® standard forms rather than drafting from scratch:

Licensees fill in blanks on these forms; drafting new contract language can be the unauthorized practice of law.

Contingencies, Deadlines, and Termination

Contingencies

A contingency is a condition that must be satisfied (or waived) for the contract to proceed. If a properly invoked contingency fails, the buyer can walk without breaching and typically recovers the earnest money.

Time Is of the Essence

Most Vermont P&S agreements include a "time is of the essence" clause. This makes every stated deadline strict and enforceable — missing the financing or closing date can be a material breach, not a forgivable slip. Extensions must be in writing and signed by all parties; a verbal "we'll give you a few more days" is unenforceable under the Statute of Frauds.

How Contracts End

Executory vs. executed: An executory contract is signed but not yet fully performed (after signing, before closing). An executed contract is one where all parties have completed their obligations — do not confuse "executed" (fully performed) with merely "signed."

Remedy trap: Because land is unique, a defaulting seller can be forced to convey through specific performance, not just money damages — a remedy buyers cannot usually obtain against most goods.