At what point is a contract made?

jim

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Hi,

Possibly a silly question but at what point during the conveyency process is a contract deemed to have been made?

The obvious answer is when contracts are signed and exchanged but are there any nuances to this i.e contract when offer is agreed and accepted and arrangements made to sign contracts and move in date agreed?

From reading the tax consol act re this it seems to say that the date of acquisition can be when a contract is made. Can it be said that a contract was made when price was agreed and when contract was drawn up (but not signed)?

Thanks,
Jim
 

SBarrett

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For a contract, you need an offer, acceptance of that offer and consideration i.e. money
 
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Sarenco

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Can it be said that a contract was made when price was agreed and when contract was drawn up (but not signed)?
No, not when it comes to property.

All dealings prior to the signing and exchange of contracts are "subject to contract/contract denied".
 

Leo

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Can it be said that a contract was made when price was agreed and when contract was drawn up (but not signed)?
Speaking from personal experience of having been gazumped, nope, no contract at that stage. Sale Agreed is just that, an agreement, not a contract.
 

Setanta12

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From reading the tax consol act re this it seems to say that the date of acquisition can be when a contract is made. Can it be said that a contract was made when price was agreed and when contract was drawn up (but not signed)?
I think some issues are being conflated here. The OP is attempting to leverage of a taxation POV &/ definitions and apply them to conveyancing. My advice is not to look to tax law for answers relating to contract law questions.

My question is - is this a conveyancing question (yes, this is the forum) or is this a taxation question? If taxation, what is the motive behind establishing a different date of acquisition - so we can advise better.
 

jim

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Contracts signed would have typically meant to me that a contract is in place but "contract made" is open a little bit to interpretation. If SBarretts definition above is correct then I guess you have made a contract if you have had an offer accepted and paid consideration. This is usally done when going sale agreed yet i always believed that when sale agreed there was no contract.

Fair point Setanta. I guess this a contract law question and how it then can be applied to tax law. The tax law states that date of acquisition is date contract is made. If contract is made at point if going sale agreed then i went sale agreed on a property before end of 2014 but signed contract in 2015. Therefore did I acquire it in 2014?
 

Pinoy adventure

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At the offer accepted surely there has too be at least 10% of the asking price paid up otherwise it's only a verbal agreement.
 

Setanta12

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'... contract is made' I'm no lawyer but methinks this isn't how this was drafted. :)

A contract can suffer countless numbers of drafts, and most are useless without all-party-signatures. If one side signs and the other performs their side of the agreement - you may, may, may have an argument for contracts other than property-transactions - but I'm no lawyer ...
 

Leo

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This is usally done when going sale agreed yet i always believed that when sale agreed there was no contract.
At the point of going sale agreed, the deposit is paid to the estate agent and this is held by them in trust until contracts are in place. While they are agents acting on behalf of the vendor, they are not in a position to enter a contract on their behalf.
 

jim

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When i have signed the contract but the counterparty has not signed can it be said, at that stage, that "a contract is made"? This is the wording from the tax consol act. It doesnt say that a contract has to be signed by both parties.it says that a property is acquired when a contract is made.

Can it be said, at this point in time, that the property has been acquired? Given that an offer has been made, has been accepted, consideration has been paid and the contract is drafted and 1 party has signed?

Sorry i know this is a bit pedantic.
 

cremeegg

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For a contract, you need an offer, acceptance of that offer and consideration i.e. money
The sale of property has a further requirement. That the contract be evidenced in writing.

The date of sale is the date written on the contract, the date the second party, usually the vendor signs.
 

Mrs Vimes

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I would presume all conditions would also have to be met to form a binding contract (eg loan approval).
 

cremeegg

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I would presume all conditions would also have to be met to form a binding contract (eg loan approval).
Nope.

It is usual in a contract for the purchase of property that it is subject to loan approval. However there is no requirement for such a term and people have often gotten into dífficulties over just that.
 

Mrs Vimes

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What I was saying is that the date of formation of the contract would be the date on which the contract becomes unconditional.
 

Sarenco

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What I was saying is that the date of formation of the contract would be the date on which the contract becomes unconditional.
No, the date of formation of the contract is the date that both parties sign and exchange.

The standard "loan approval clause" provides that if loan approval is not obtained within the specified period, the contract can be rescinded by either party and in such event the purchaser is refunded his deposit without interest. Obviously a contract would have to exist to be rescinded.
 

jim

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This is more of a legal question than tax question but im not sure how to move the thread.

Contract to buy was signed 15th jan 2015 so just falls outside of 2014 where cgt is exempt on sale of properties purchased that year.

As a bit of further background....the legislation talks about the acquisition being when "the contract was made" not when it was signed. Although maybe they are the same thing?

Could it be interpreted that contract was made when it was drafted, price agreed, consideration was paid over and at least 1 party signs it - all of which happened in december 2014? Is there any possibility of leniency here from the revenue or even is there any scope for interpretation?!

Old thread but am keen to check this again.
Thanks.
 

ArthurMcB

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No, the date of formation of the contract is the date that both parties sign and exchange
I disagree. The date that the contracts are signed and exchanged is the date that the contracts are signed and exchanged and probably executed/effective/enforceable.

However, the op question is slightly different. The above happens after the "making of" the contract. The TCA 1997 (542) specifically refers to a contract being "made". It doesnt refer to it being signed for example.

The contract is made by there being an offer, acceptance, consideration as well as the actual contract itself being drafted.

When the 2nd party signs the contract becomes "signed" as well as executed/effective/enforecable/exchanged etc.
 
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Sarenco

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The contract is made by there being an offer, acceptance, consideration as well as the actual contract itself being drafted.
Nope.

When it comes to property no contract exists until it is signed and exchanged by both parties. See the Statute of Frauds Act, 1695.

Prior to that point, all correspondence, etc. is subject to contract/contract denied.
 
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