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Chapter 8

Basic Contract Law

QuestionAnswer
assignment Refers to a transfer of rights or duties under a contract to a third party.
Auction A form of selling property where oral bids are taken and the property is sold to the highest bidder.
bilateral contract A type of contract in which both parties promise to do or refrain from doing something; one promise is exchanged for another. "I will do this and you will do that"
compensatory damages Money damages awarded to the injured party to compensate them for the breach of contract, but not to punish the breaching party.
consequential damages Special damages that might be obtained if the damages upon breach were reasonably foreseeable to the breaching party at the time of making the contract.
Consideration That received by the grantor in exchange for a deed. Something of value that induces a person to enter into a legally enforceable contract.
Contract Legally enforceable promise or set of promises between legally competent parties that must be performed for consideration. Law provides remedy for breach.May be either unilateral,(only one party is bound)or bilateral (all parties are legally bound).
counteroffer An attempt by the offeree to change any of the terms proposed by the offeror
Earnest money deposit Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
executed contract A contract in which all parties have fulfilled their promises.
Executory Contract A contract under which something remains to be done by one or more of the parties.
Express Agreement/Contract An oral or written contract in which the parties state the contract's terms and express their intentions in words.
implied contract A type of contract in which the agreement of the parties is demonstrated by their actions or conduct.
Legality of Object The purpose of a legally enforceable contract; cannot be for illegal actions or acts against public policy.
Legally Competent Parties People who are recognized by law as being able to contract with others; those of legal age and sound mind; a requirement of a legal enforceable contract.
liquidated damages The amount of money that will compensate the injured party for breach, which the parties agree to at the time they enter into the contract.
“Meeting of the minds” A deliberate agreement between parties; offer and acceptance; “meeting of the minds.” A requirement of a legally enforceable contract.
“Time is of the essence” A phrase in a contract that requires the performance of a certain act no later than the stated time or the noncompliant party is in breach and the contract may be voidable by the opposite party.
Mutual assent A deliberate agreement between parties; offer and acceptance; "meeting of the minds." A requirement of a legally enforceable contract.
Novation Substituting a new contract for an old one or substituting new parties to an existing contract.
Offer to Purchase and Contract In NC, the most common title for a real estate sales contract
Offer and Acceptance Two essential components of a valid contract.
Parol evidence rule A rule of evidence providing that a written agreement is the final expression of the agreement of the parties, not to be varied or contradicted by prior or contemporaneous oral or written negotiations.
reality of consent If misrepresentation, fraud, mistake of fact, undue influence or duress are absent in contract formation, good contract is formed.
rescission The legal remedy of canceling, terminating, or annulling a contract and restoring the parties to their original positions.
specific performance A legal action to compel a party to carry out the terms of a contract.
Statute of Frauds A state law that requires that certain instruments that convey interest in real estate be in writing to be legally enforceable, such as deeds, real estate sales contracts, and certain leases.
statute of limitations The law pertaining to the period of time within which certain actions must be brought to court or be lost.
time is of the essence This means that the contract must be performed within the time limit specified, and any party who has not performed on time is liable for breach of contract.
unenforceable contract Has all of the elements of a valid contract; however, neither party can sue the other to force performance; valid as between the parties.Verbal contract usually not enforceable.
unilateral contract A one-sided contract in which one party makes a promise to induce a second party to do something. "I will give you a reward if you find my dog"
valid contract A contract that complies with all 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.
void contract A contract that has no legal force or effect. It is unenforceable in a court of law b/c it does not meet the essential elements of a contract.
Created by: whitwill