Definition
A binding agreement is one where both parties have legal obligations. Once signed, breaking it without legal cause can result in lawsuits and financial penalties.
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Once an offer is accepted by the seller, the purchase and sale agreement becomes a binding contract. Both the buyer and seller are now legally obligated to perform their duties as outlined in the agreement. Binding agreements typically remain in effect until closing, contingencies are satisfied, or the agreement is terminated under specific conditions outlined in the contract.
Pro Tip
Understand your obligations before signing—binding agreements are legally enforceable.
Example
Once both parties signed the PSA, they had a binding agreement to complete the transaction by the closing date.