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Chapter 9

Real Estate Contracts

Accord and satisfaction A settlement agreement between the parties, often in the form of some compromise, that annuls and discharges the original agreement.
Assignment The transfer of legal rights and obligations by one party to another.
Bilateral contract A contract based on mutual exchange of promises or acts between the parties at the time the contract is signed.
Breach of contract Failure, without legal excuse, to to perform any promise that forms the whole or part of a contract.
Consideration Anything of value offered as an inducement to contract under the law. Examples: Money, action, forbearance.
Contractual capacity Legally competent to contract. Barriers: underage (minor), mentally incompetent, intoxication or altered consciousness at time of signing.
Counteroffer A rejection of an offer coupled with a new offer.
Damages Compensation for financial loss caused by breach of contract as may be awarded by the court.
Duress Fear or threat. A contract signed under duress renders it voidable.
Earnest money Money the buyer deposits with the offer to purchase to show that the buyer is in earnest.
Executed contract A contract that has been fully performed by the parties.
Executory contracts A pending contract. Contracts are generally considered "executory until closing".
Express contracts One in which the parties to the contract have definitely expressed all the terms and conditions under which the parties agree to become contractually bound.
Full performance All terms of a contract have been fully performed by all parties.
Illusory offer A vague offer. Acceptance will not result in the creation of a valid contract. Does not obligate the offeror.
Implied contract Contract implied from the conduct and actions of the parties.
Land contracts Contract for deed: A contract of sale and a financing instrument wherein the seller agrees to convey title when buyer completes the purchase price installment payments. Synonyms: installment land contract, conditional sales contract.
Mutual assent All parties in a valid contract agree to the terms and conditions in the contract.
Negligent misrepresentation Unintentional. Misconception as to the facts. A statement believed to be true, but a reasonable person should have known.
Novation The substitution of a new contract for a prior contract.
Offeree The party to whom an offer is made.
Offeror The party making an offer.
Parol Evidence Rule Assumes the written words of a contract reflect the entire agreement. Oral statements which do not agree with the written words are to be disregarded.
Ready, willing, and able Ready to buy, willing to buy, and financially able to pay the asking price.
Unilateral contract A contract in which one party makes a promise to the other and the second party returns an action in response to the promise.
Valid contract A contract that is valid and enforceable. Legally binding upon all parties.
Void contract A contract that is absolutely unenforceable and has no legal force or effect.
Voidable contract Results from failure to meet some legal requirement in negotiating the agreement.
What are the essential elements of a contract? Mutual assent; offer and acceptance; consideration; contractual capacity; and lawful objective.
Reality of consent A valid contract is based on the voluntary meeting of the minds (mutual assent).
A seller has given a prospective buyer the option to purchase his property for $150,000 within the next six months. Is this a bilateral or unilateral contract? Unilateral. The seller has made a promise that the buyer will return with an action (purchasing the property) in response if they choose to buy the home.
The objective to in drawing up a contract is to create an agreement that is ______________ and enforceable. binding
True or false: An offer may be terminated by its acceptance. True. An offer becomes a contract when it is accepted.
Unless there are _____________ promises in a contact, it is not valid. mutual
Statute of Frauds Requires that certain types of contracts be in writing to be valid.
DREAMOILS Deeds, Restrictive (Covenants), Easements, Assignments, Mortgages, Options, Installment (Land Contracts), Leases (of 3+ years)
The usual manner of terminating contracts is by full performance
Impossibility of performance Does not usually terminate contract, but exceptions occur.
Operation of law The manner in which the rights and/or liabilities of parties may be changed by the application of law without the act or cooperation of the parties affected.
A contract is ______________ provided no prohibition against it is spelled out in the contract itself. assignable
___________________ will be construed most strongly against the preparer. Ambiguity
Contract Remedies Money damages; specific performance; rescission
Created by: PoeticVine