‘Exchange of contracts’ is the legal term used to describe that a contract has been entered into.
It is the physical act of the contract being signed by all parties then ‘exchanged’ to one another. It is this act which creates a legal relationship between the buyer and seller.
Prior to an exchange of contracts, both the buyer and the seller can change their mind and not proceed with the deal, despite any verbal agreements.
Buyers should be aware that any expenses occurred prior to exchange of contracts may be lost if the seller decides not to proceed with their offer. Likewise, the seller is not able to establish any legal relationship with the buyer until an exchange of contracts has taken place. Further, sellers should be aware of any cooling-off period that may exist for the benefit of the buyer.
