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Chapter 9
Real Estate Contracts
| Question | Answer |
|---|---|
| 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 |
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