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.

Contract Elements and Validity (Covered Nationally)

The common-law elements (offer, acceptance, consideration, legal capacity, lawful purpose) and the void/voidable/unenforceable distinctions are developed in full in National Chapter 4 and apply identically in Vermont, so they are not repeated here. The one Vermont anchor to remember is that an unenforceable contract most often arises from a failure of the Statute of Frauds above: a real estate promise that is not in a signed writing is valid in form but a Vermont court will not enforce it.

Focus your Vermont study on the rules that follow, the earnest-money trust duty and the deposit timeline, because those are where Vermont law adds requirements national courses do not cover.

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 in Vermont

Contingency types (financing, inspection, appraisal, title), the ways a contract ends (performance, rescission, breach, impossibility), the executory-versus-executed distinction, and the specific-performance remedy are general principles developed in National Chapter 4 and are not repeated here. They operate the same way in Vermont. What you must add for the Vermont exam is the interaction with the state Statute of Frauds discussed above.

Vermont Point: Written Extensions and "Time Is of the Essence"

Most Vermont purchase and sale agreements include a "time is of the essence" clause, which makes every stated deadline strict, missing the financing or closing date can be a material breach rather than a forgivable slip. The Vermont-specific trap is that any extension of those deadlines must itself be in writing and signed by all parties. Because the underlying contract concerns an interest in land, the Statute of Frauds reaches the modification too, so a verbal "we'll give you a few more days" is unenforceable.

When a Vermont fact pattern shows parties agreeing orally to push a deadline, the correct answer is that the original written deadline still controls.