11 - Contracts Flashcards
Listing Contract
employment contract for professional services negotiated between member of public and real estate broker
Purchase and Sale Contract
negotiated between owner of property and potential buyer. specifies terms and conditions in trasnfer of ownership
Contract
agreement between 2 or more competent parties that create obligation to do, or not do, a certain thing
can be written or oral
Assignment
sale, transfer, or subrogation of rights in a contract
Assignee
party who receives the rights in a contract
Assignor
party who grants the rights in a contract
not relieved of performance after assignment
if assignee fails to perform, assignor is responsible for performance of contract as originally agreed
4 Essential Elements of Valid Contract
Lawful Subject
Offer & Acceptance
Consideration
Competent Parties
Lawful Subject
contract must be lawful (legal) and not against public welfare
Offer & Acceptance
“meeting of the minds”
Consideration
contract must specify “sufficient consideration” (valuable $ or good, which are things not expressed with money)
Competent Parties
two or more competent parties
Statute of Frauds
enacted 1677 in England
protection against fraud in the sale of real property
requires contract to be in writing for a transfer of a right or interest of land)
COLIC
C - competent parties
O - offer and acceptance
L - Lawful subject
I - In writing
C - Consideration
Statute of Limitations
time limits for legal action to enforce rights under a contract
Oral - action within 4 years
Written - action brought within 5 years
Express Contract
all terms and conditions are specified and agreed to by the parties
complete understanding
can be oral or written
Implied Contract
SOME terms and conditions can be assumed by nature of the agreement or words and actions of parties
oral or written
can be an implied provision of another contract
Bilateral Contract
both parties mutually agree to be bound to performance of terms/conditions
promise for a promise
Unilateral Contract
one party expressly agrees to perform an act. this is the only person bound by terms of contract.
promise in exchange for act
Executory Contract
if any term or condition remains to be performed
Executed Contract
when all parties have fully performed
Formal Contract
written
contains all elements of valid contract
may recorded in public record
enforceable under Statute of Frauds
“wholly written and under seal”
Informal (Parol) Contract
oral agreement
may or may not contain elements of valid contract
not enforceable under statute of frauds
Void contract
unenforceable
- impossible or illegal
- became illegal due to changes in laws
- legal but declared null by courts b/c it violated fundamental principles or is against public policy
Voidable contract
valid agreement that can be enforceable
- one or more parties can revoke or cancel at any time
- can be legally rejected if a party states a defect
Reasons for a voidable contract
- failure by a party to disclose material fact
- mistake, misrepresentation or fraud
- coercion, undue influence or duress
- lack of capacity
- breach
- minor enters into contract with adult
Acceptance
an offer accepted by the parties becomes a contract
Withdrawal
offeror can withdraw an offer at any time up to the time that acceptance of offer has been communicated
Rejection or counteroffer
offer is terminated if offeree rejects the offer
counteroffer is considered rejection of offer
Lapse of time
offer terminates at the end of time specified for it
Death or insanity
terminates the offer
Destruction of property
when improvements are destroyed by fire or natural disaster, offer is terminated
WILD CARD
W - withdrawal
I - insanity
L - lapse of time
D - death of either property
C - counteroffer
A - acceptance
R - rejection
D - destruction of property
Contract Termination
BRRLAP
Breach Revocation Renunciation Lapse of Time Abandonment Performance
Breach
a party fails to meet obligations
injured party can seek relief in court
Revocation
can legally revoke and terminate the contract
sometimes they have power to do so, but not the legal right
Renunciation
mutual consent of both parties to terminate
3 remedies for breach of contract
Suit for Cancellation (Rescission)
Suit for Performance
Suit for Damages
Liquidated Damages
specified and agreed to upon contract
both parties have agreed to penalty in the event of a breach by either party
usually involves seller retaining deposit if buyer defaults
Unliquidated Damages
not specified in contract, but determined by court
suit for damages
To act as the buyer’s broker and receive compensation from them, a licensee may use an _______
Exclusive Buyers Brokerage Agreement
Agreement that establishes exclusive representation w/ buyer, provides retainer fee, contains limitation of licensee’s liability
Exclusive Buyers Brokerage Agreement
right to buy property during specified period of time
unilateral
no promise to buy property, just an option
option contract
- in writing
- price and terms
- length of time
- legal description
- consideration ($)
option contract requirements
token consideration is a ____, not a ______
listing, not a contract.
Another name for contract for deed is _____
installment contract
in what circumstances is a broker’s commission subject to forfeiture?
The broker violates a fiduciary duty.
To which of the following does the phrase “meeting of the minds” refer?
Offer and acceptance
Which statute requires a purchase and sale contract to be in writing to be enforceable?
Statute of Frauds
expiration of specified time period, death of offeror, counteroffer can all do what?
terminate an offer
what cannot terminate an offer?
a failure to obtain a binder deposit
What type of contract exists when the court determines that a contract existed due to the actions of the parties?
Implied contract
A buyer and seller entered into a Purchase and Sale Agreement. The buyer chose not to close and defaulted on the agreement. The seller claimed the escrow deposit. What type of damages can be sought?
Liquidated damages to the seller
what is true of an “as is” provision in a sales contract?
The seller is still required to disclose all known defects that may materially affect the value of the property.
What is true regarding the Statute of Frauds?
it requires certain contracts to be in written form to be enforced in court
Option contract is a _____ contract that is binding upon _____
unilateral, Optionor
Acceptance, Rejection, Withdrawal are all ways that an____ can be _____
offer, terminated
Breach, Performance, or Lapse of time are examples of _____
valid ways to terminate a contract
