Agreement between the parties: when can it be said to be legally concluded and binding?

Agreements on real estate sales established through the exchange of e-mails between real estate agents: are they valid? And can pre-contractual responsibilities be set up for these subjects?

With this guide, addressed to both Real Estate professionals and sellers and buyers, we want to clarify when an agreement between the parties in real estate matters can be considered concluded and, therefore, binding, taking into account the intervention and the role of the mediator. In order to obtain updated and reliable information on current regulations, we relied on the lawyer Mariangela Marrangoni, Great Estate service partner.

What makes a contract valid?

In accordance with Article 1321 of the Civil Code, the contract is the agreement of two or more parties to establish, settle or terminate a legal patrimonial relationship between them: in our case, a real estate sale. In general, for the purposes of forming a valid agreement, all legal systems require the meeting of the manifestations of the wills of the parties (meeting of the minds).

The essential acts for the formation of the contract are the PROPOSAL and its ACCEPTANCE.

Most of the national legal systems observe the principle according to which the proposal is considered accepted, and therefore the contract concluded, only if the acceptance corresponds exactly to the proposal (mirror image rule). In our case, when the purchase proposal presented and signed by the buyer is followed by an acceptance by the seller exactly corresponding to the proposal of the first party, then the contract can be considered valid.

If, against the purchase proposal, the selling party makes a request with changes or exceptions, this cannot be considered as acceptance, but as a COUNTER-PROPOSAL which, in turn, in order to complete the agreement, must necessarily be accepted by the party who formulated the proposal.

This principle is also foreseen in the Italian legal system which in art. 1326 of the Civil Code states:

“The contract is concluded when the person making the proposal is aware of the acceptance of the other party. Acceptance must reach the proposer within the term established by him or as ordinarily necessary according to the nature of the deal or in accordance with customs. The proposer can consider the late acceptance as effective, provided that he immediately gives notice to the other party. If the proposer requests a specific form for acceptance, the acceptance has no effect if it is given in a different form. An acceptance not in accordance with the proposal is equivalent to a new proposal”.

Sometimes the parties, buyer and seller, even without formal acceptance of the changes made, execute the contract which will be concluded FOR CONCLUDING FACTS (in Latin facta concludentia). These latter are also called demonstrative facts and constitute a form of tacit manifestation of the will to negotiate, as they correspond to an attitude or behavior that is incompatible with a different will from that which can be deduced from the facts themselves.

For example, the agreement in which the acceptance is carried out by direct execution of the service (payment) is concluded by conclusive behavior.

The intervention of the consultant: the figure of the atypical mediator.

In real estate sales, the importance of the intervention of a mediator is universally recognized, that is to say, the real estate agent or consultant who assists the parties in the phases of the sale.

Art. 1754 C.C. states that:

“A mediator is someone who connects two or more parties for the conclusion of a deal, without being linked to any of them by relationships of collaboration, dependence or representation.”.

This obligation of impartiality means, at least implicitly, that he cannot act in the particular interest of any of the future contractors, but must operate in the interest of all the parties involved.

Where the mediator carries out an activity in execution of the assignment of only one party, he will constitute the figure of the “atypical mediator”,  becoming a real agent pursuant to art. 1703 and ss. c.c.

This is what happens, for example, when a buyer uses Great Estate’s Property Finder service (Dedicated Research Service) to look for a property for purchase: with an assignment of this type, the Great Estate’s trusted advisor will be the only contact person and will deal exclusively with the search for a property to meet the customer’s needs. We can therefore consider the Property Finder as an atypical broker. Similarly, a consultant who deals exclusively with protecting the interests of the selling party can be considered an atypical mediator as well.

Mandate and power of attorney: the legal aspects to know.

The specific figure of the atypical mediator is regulated both by the aforementioned general rules on the mandate and by the existing contract between the parties; therefore, he will accrue the right to the commission only towards the mandator with respect to which he is contractually linked.

Pursuant to Article 1703 of the Italian Civil Code:

“The mandate is the contract by which one party (attorney) undertakes to perform one or more legal acts on behalf of the other (mandator)”.

The mandate can be with or without representation.

When the mandate does not have any representation, the agent negotiates in his own name and the third parties may also be completely unaware  that the real owner of the deal is another person.

Otherwise, when the mandate is with representation, the agent is granted a power of attorney: an act by which a person confers on another the power to carry out legal acts in his own name and in his own interest. Through this act, third parties are made aware that they are negotiating with someone who is not the real owner of the business.

The main function of the power of attorney is to attribute the power to spend the name of the representative; while the function of the mandate is to attribute to the agent the power to carry out a legal activity in the interest of the principal.

To sign a power of attorney, it is necessary to go to the notary office with an identity document, tax code and complete personal details of the person to whom you want to entrust yourself.

Art. 1392 C.C. states that:

“The power of attorney has no effect if it is not conferred with the forms prescribed for the agreement that the representative must conclude”.

In other words, the power of attorney must comply with the formal requirements that the legal system provides for the act or acts that the representative is called upon to perform. For example, if the representative is called to carry out a real estate transfer by means of a public deed, the power of attorney must also have the same form of a public deed.

According to the jurisprudential orientation of the Court of Cassation (see Civil Cassation judgment of 13 April 2005), it is not sufficient that the power of attorney exists or that it has been exhibited, or that the other contracting party is aware of its existence, nor does he detect any reliance on the existence of the power of representation.

It follows that it is necessary:

• clarify in which capacity the atypical mediator acts;

• verify the existence of any power of attorney;

• assess the individual responsibilities both towards the represented party and towards the contractual counterparties also in light of the principle of good faith (which informs all contractual matters from the pre-contractual stage and then in the execution of the contract itself).

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The article is intended to provide information of general interest, without offering advice for specific situations or problems.