Precontract

A precontract for the sale of real estate is an agreement concerning a future transaction. In order for the preliminary agreement to be binding on the parties, the legal action requires the specified form of a real estate sale.

A precontract on a sale of real estate is typically used when the seller and the buyer intend to make a transaction, but the conditions for the transaction are not yet in place. The precontract specifies the conditions that must be fulfilled for the transaction to take place, as well as the terms under which the transaction will be conducted. Generally, the precontract includes a contractual penalty, which the party that unjustifiably withdraws from the agreement must pay to the contracting party.