What happens to a contract when the home involved burns down?

When a home that is the subject of a contract burns down, the contract is considered void due to the destruction of the subject matter. A contract requires a lawful purpose and a viable object, which in real estate is the property itself. When the property is no longer in existence, as in the case of a fire, the contract can no longer be performed as agreed.

In such circumstances, the law recognizes that the inability to fulfill the essential terms of the contract renders it void, meaning that it is treated as if it never existed. This occurs because the fundamental condition of having a property to buy or sell has been eliminated. Consequently, neither party is bound to carry out the contract's terms following the destruction of the property.

Therefore, the correct understanding is that the contract is void due to the loss of the subject matter.