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Real Estate - Ch. 11
Real Estate Contracts
Term | Definition |
---|---|
amendment | A change to the existing content of a contract (i.e., if words or provisions are added to or deleted from the body of the contract). Must be initialed by all parties. |
assignment | The transfer in writing of interest in a bond, mortgage, lease, or other instrument. |
bilateral contract | a contract by which all parties to the instrument are legally bound to act as prescribed. |
breach of contract | Violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due. |
consideration | (1) That received by the grantor in exchange for the deed. (2) Something of value that induces a person to enter into a contract. |
contingencies | Provisions in a contract that require a certain act to be done or a certain event to occur before the contract becomes binding. |
contract | A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. |
counteroffer | A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror. |
disclosure | Relevant information or facts that are known or should have been known. |
duress | Unlawful constraint or action exercised upon a person whereby the person is forced to perform an act against her will. A contract entered into under duress is voidable. |
earnest money | Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but to be applied to the purchase price if the sale is closed. |
enforceable contract | A contract that meets all the elements of a valid contract, including compliance with any applicable statute of frauds or other law that requires it to be in writing and signed by the parties. |
executed contract | A contract in which all parties have fulfilled their promises and thus performed the contract. |
executory contract | A contract under which something remains to be done by one or more of the parties. |
express contract | An oral or written contract in which the parties state the contract’s terms and express their intentions in words. |
fraud | Deception intended to cause a person to give up property or a lawful right. |
implied contract | A contract under which the agreement of the parties is demonstrated by their acts and conduct. |
liquidated damages | An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract. |
novation | Substituting a new obligation for an old one or substituting new parties to an existing obligation. |
offer and acceptance | Two essential components of a valid contract; a “meeting of the minds.” An offer is a promise made by the offeror. Acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror. |
option | An agreement to keep open for a set period an offer to sell or purchase property. |
owner financing | The seller is the primary lender securing the property by means of a deed, note and mortgage, deed of trust, or contract for deed. |
purchase money mortgage | A note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate. |
rescission | The practice of one party canceling or terminating a contract, which has the effect of returning the parties to their original positions before the contract was made. |
statute of frauds | That part of a state law that requires certain instruments, such as deeds, real estate sales contracts, and certain leases, to be in writing to be legally enforceable. |
specific performance | A legal action to compel a party to carry out the terms of a contract. |
“time is of the essence" | A phrase in a contract that requires the performance of a certain act within a stated period of time. |
unenforceable contract | A contract that has all the elements of a valid contract, yet neither party can sue the other to force performance of it. For example, an unsigned contract is generally unenforceable. |
unilateral contract | A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise. |
void contract | A contract that has no legal force or effect because it does not meet the essential elements of a contract. |
voidable contract | A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties. |