In practice, a pre-contract is often used when purchasing real estate. It is a legal instrument that provides greater legal security for both the buyer and the seller, especially when the conditions for signing the main contract have not yet been fulfilled.
What is a Pre-Contract?
A pre-contract is a commitment by both parties to enter into the main purchase contract under previously agreed terms in the future. It is legally binding and allows the parties time to arrange conditions (e.g., obtaining credit, resolving land registry issues, obtaining building permits).
What Must a Valid Pre-Contract Contain?
For a pre-contract to be legally binding, it must include the essential elements of the main contract:
It is also important that the pre-contract is in writing.
What Happens If One Party Withdraws?
If one party unjustifiably withdraws from the pre-contract, the other party may demand:
If an advance payment (earnest money) was made with the pre-contract, the following applies:
Advice
Before signing a pre-contract, it is advisable to consult a real estate expert or lawyer to ensure that the conditions are clearly defined, and in case of a dispute, you will be well protected legally.
