11. Real Estate Contracts

Question 1

ASSIGNMENT

Answer 1

The transfer in writing of interest in a bond, mortgage, lease, or other instrument.

Question 2

BILATERAL CONTRACT

Answer 2

A contract where both parties promise to do something; one promise is given in exchange for another. See also contract.

Question 3

BREACH OF CONTRACT

Answer 3

Violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due.

Question 4

CONSIDERATION

Answer 4

(1) That received by the grantor in exchange for his or her deed. (2) Something of value that induces a person to enter into a contract.

Question 5

CONTINGENCY

Answer 5

A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.

Question 6

CONTRACT

Answer 6

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. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

Question 7

COUNTEROFFER

Answer 7

A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted there after unless revived by the offeror.

Question 8

DISCLOSURE

Answer 8

Providing information, such as property condition, to help consumers make informed decisions.

Question 9

EARNEST MONEY

Answer 9

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.

Question 10

EQUITABLE TITLE

Answer 10

The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another’s name.

Question 11

ESCROW CONTRACT

Answer 11

An agreement between a buyer, seller, and escrow holder setting forth rights and responsibilities of each. An escrow contract is entered into when earnest money is deposited in a broker’s escrow account.

Question 12

EXECUTED CONTRACT

Answer 12

A contract in which all parties have fulfilled their promises and thus performed the contract.

Question 13

EXECUTORY CONTRACT

Answer 13

A contract under which something remains to be done by one or more of the parties.

Question 14

EXPRESS CONTRACT

Answer 14

A contract that exists when the parties state the terms and show their intentions in words. An express contract may be either oral or written. See also express agreement.

Question 15

IMPLIED CONTRACT

Answer 15

A contract in which the agreement of the parties is demonstrated by their acts and conduct. See also implied agreement.

Question 16

INSTALLMENT CONTRACT

Answer 16

A contract for the sale of real estate whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until a future date, which may be not until final payment. Also called a contract for deed or articles of agreement for warranty deed.

Question 17

LAND CONTRACT

Answer 17

A contract where the seller (also known as the vendor) retains legal title. The buyer (called the vendee) takes possession and gets equitable title to the property. Also called a contract for deed, a bond for title, an installment contract, a land sales contract, or articles of agreement for warranty deed.

Question 18

LEASE

Answer 18

A written or oral contract between a landlord (the lessor) and a tenant (the lessee) that transfers the right to exclusive possession and use of the landlord’s real property to the lessee for a specified period of time and for a stated consideration (rent). By state law leases for longer than a certain period of time (generally one year) must be in writing to be enforceable.

Question 19

LIQUIDATED DAMAGES

Answer 19

An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract.

Question 20

NOVATION

Answer 20

Substituting a new obligation for an old one or substituting new parties to an existing obligation.

Question 21

OFFER AND ACCEPTANCE

Answer 21

Two essential components of a valid contract; a “meeting of the minds.”

Question 22

OPTION

Answer 22

An agreement to keep open for a set period an offer to sell or purchase property.

Question 23

REALITY OF CONSENT

Answer 23

A contract must be entered into as the free and voluntary act of each party.

Question 24

RESCISSION

Answer 24

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.

Question 25

STATUTE OF FRAUDS

Answer 25

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.

Question 26

SUIT FOR SPECIFIC PERFORMANCE

Answer 26

If a seller breaches a real estate sales contract and the buyer asks the court to force the seller to go through with the sale and convey the property as previously agreed.

Question 27

TIME IS OF THE ESSENCE

Answer 27

A phrase in a contract that requires the performance of a certain act within a stated period of time.

Question 28

UNENFORCEABLE CONTRACT

Answer 28

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.

Question 29

UNILATERAL CONTRACT

Answer 29

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.

Question 30

VALID CONTRACT

Answer 30

A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.

Question 31

VOID CONTRACT

Answer 31

A contract that has no legal force or effect because it does not meet the essential elements of a contract.

Question 32

VOIDABLE CONTRACT

Answer 32

A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties.