Terms and Questions from Ch. 6 of Michigan RE Test Book
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| Contract | Agreement between competent legal parties to do or not do a legal act in exchange for consideration
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| Express Contract | Parties agree to all terms and conditions
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| Implied Contract | Inferred from actions of one party without express agreement
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| Bilateral Contract | A promise in exchange of a promise (Home purchase-buyer promises to purchase and seller promises to sell.)
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| Unilateral Contract | A promise in exchange for performance (Options-Optionor promises to sell land to optionee at a certain price for a certain time period.)
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| Executed Contract | Fully performed contract (signed).
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| Executory Contract | Not fully performed yet. (Mortgage-contract ends when last payment is made.)
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| Valid Contract | Binding and enforceable by law to all parties
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| Unenforceable Contract | Appears to have validity but is not enforceable by law
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| Void Contract | Essential elements may exist but is not legal. (Something illegal ie: contract to kill someone or Act of God or operation of law that take or destroy the property)
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| Voidable Contract | Failure to meet some legal requirement in negotiating agreement. (Not fully disclosing property defects). Wronged party has ability to void contract. Contracts with minors only voidable by minor.
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| Certificate of Estoppel | A document that provides for legal capacity(of age) to enter contract. If a minor who signed this later tries to claim contract is voidable this "estops" them from doing so.
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| What are the 7 essential Elements needed in a contract? | 1. Offer 2. Acceptance(meeting of the minds) 3. Consideration 4. Legal capacity 5. Reality of consent(all parties know what is being agreed upon) 6. Legality of object 7. Possibility to complete
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| Counteroffer | Acceptance that varies from the original offer. Voids the first offer.
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| What are the 6 ways in which an offer can be terminated? | 1. Expiration of offeror time limit 2. Death/Insanity of either party prior to acceptance 3. Revocation by offeror prior to notice of acceptance 4."Reasonable" time period passes 5. Offeree fails to comply with terms 6. Rejection
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| Equitable Title | Interest in Real Estate sufficient to warrant court protection of that interest
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| Legal Capacity/Competence | Mental/Emotionally capable to enter into a contract
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| Valuable consideration | Anything given in a contract to make valid and is based on dollars and cents. Can be promise of something valuable.
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| Reality of Consent | Parties have accurate knowledge of terms and conditions in contract
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| Fraud | Intentional deceit or lying about facts that someone else relies on to make a decision. Can void contract.
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| Misrepresentation | Unintentional misstatement of facts. Can void contract
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| Puffery | Exaggeration of Property benefits
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| Mutual Mistake | Mistake by both parties. Makes voidable
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| Undue Influence | Improper/wrongful control or influence by one person over another
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| Duress | Threat of violence or fear of safety
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| Legality of Object | Contract must have legal purpose
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| Condition | Act or event other than time that affects duty to render performance.
ie. a contingency
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| Condition Precedent | act/event that must exist/occur BEFORE performance
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| Condition Concurrent | Performances are exchanged at same time.
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| Condition Subsequent | Discharges duty to perform if something happens to property before closing.
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| Express Condition | Condition spelled out clearly or implied by fact(gathered from terms)
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| Constructive Condition | Implied condition that is court constructed in interest of justice.
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| Statute of Frauds | Real Estate contracts must be in writing and have all essential elements to be enforceable.
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| Parole Evidence Rule | Oral explanation can support written contract but not contradict it.
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| What are the 4 ways in which a contract can be discharged/terminated? | 1. Agreement of parties 2. Full Performance 3. Impossibility to perform(act of god) 4. Operation of Law
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| Novation | substitution of new contract or new party for old in place of prior contract-only by agreement of all parties.
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| Assignment | Transfer/Sale of contract rights Assignor transfers to receiving assignee.
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| Breach of Contract | Default, does not discharge contract obligations only terminates their rights in the contract.
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| What are the 4 legal remedies against a defaulting party? | 1. Specific Performance 2. Rescission 3. Compensatory Damages 4. Liquidated damages
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| Specific Performance | Courts ordering that a contract will be completed as agreed due to the uniqueness of real property.
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| Rescission | Court action to make contract void or as if never happened.
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| Compensatory Damages | Actual amount of monies lost due to contract breach
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| Liquidated Damages | Monies set forth in contract in case of breach of contract
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| Listing Contract | Creates special agency relationship between seller of real property and a broker-to find a buyer.
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| Buyer's Contract | Creates special agency relationship between purchaser of real property and broker-to find a property for purchase.
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| What two tests determine a broker/agent's entitlement to a commission? | 1. Ready, willing, and able(buyer/seller) 2. Acceptance
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| Open Listing | Seller lists property with one or more broker but seller can sell and broker not entitled to commission fee.
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| Exclusive Agency Listing | Seller lists with one broker but seller can sell and broker not entitled to commission fee.
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| Exclusive Right-to-Sell Listing | Seller lists with one broker and even if the sellers sells the property the broker is entitled to commission fee.
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| Why is the Exclusive Right-to-Sell listing best for both broker and seller? | Broker has more opportunity to earn a commission and therefore spends more time, money, effort to sell.
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| Carryover Provision | Allows broker to earn a commission is sold by their efforts after an expired listing.
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| Besides expiration, in what instances would a listing be terminated? | Death/Incapacity of buyer or seller, property destruction, condemnation, seller or buyer bankruptcy, broker license revoked, mutual agreement, breach of terms by buyer/seller/broker.
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| What is the purpose of a Competitive Market Analysis? | Measures similar/comparable sold property against subject property to arrive at fair market value
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| What is the purpose of a purchase agreement or offer to purchase? | Bilateral express contract; buyer promises to buy under certain terms and conditions, seller promises to convey marketable title.
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| What is the purpose of Earnest Money? | Given by buyer to show sincerity, financial capability, and possible liquidated damages. Note legally required for a valid offer to purchase.
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| Time is of the Essence | Provision for timelines in a purchase agreement
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| Land Contract | Also Contract for Deed, buyer pays purchase price in installments and seller transfers legal title upon full payment.
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| Vendor | Seller in a land contract
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| Vendee | Buyer in a land contract
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| Doctrine of Equitable Conversion | Prevents vendor from doing anything to jeopardize the interest of the vendee.
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| Option | Express Unilateral contract: An owner sells right to purchase property for a particular price for a specified time.
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| Optionor | Seller in an Option
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| Optionee | Buyer in an Option
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| Right of First Refusal | Owner gives a person the First right to purchase property at whatever price is offered by another potential buyer.
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