Issue: Completion of contract forms vs. drafting

By Blackwell M. Brogden, Jr., Chief Deputy Legal Counsel

In their haste to secure a deal, licensees sometimes create a "letter of intent" or "memorandum of understanding" signed by the parties and obligating them to execute a formal contract at a later date. However, no matter what such documents are called, they are often actually contracts which must be drafted by an attorney, not a licensee. Real estate licensees may "fill in" preprinted contract forms but may not draft contracts or special contract form provisions.

Real estate licensees must:

• Know that any document imposing an obligation between two or more separate persons or entities and supported by consideration is a contract.
• Refer parties to an attorney to have a contract, addendum or special provision drafted when an appropriate form is not available.
• Use only contract forms that comply with Commission rules.

Real estate licensees must NOT:

• Draft any document which binds the parties including
• a "letter of intent" or "memorandum"
• an additional provision or addendum to a contract
• other contracts such as a lease, option, etc.
• Convert documents used in prior transactions into "forms" to be completed for current transactions.
• Delete provisions from forms (electronically generated or otherwise) unless the deletions
• are of specific provisions,
• are made at the direction of the parties,
• are clearly shown on the final document and
• do not result in a contract that is missing a material term.
• Draft atypical, special provisions for insertion in contract forms.