5 Contracts

Question 0

Binder

Answer 0

This is a good faith estimate between the parties that includes all the terms that keeps the agreement together until the final longer version of the contract is drafted.

Question 1

Assignment

Answer 1

Transferring the legal rights from one party to another. In real estate, contracts are usually assignable unless they state not for assignment.

Question 2

Earnest money

Answer 2

Good faith money put up by the buyer that can be forfeited to the seller in case of a breach by the buyer.

Question 3

Nominee

Answer 3

A party who will be added to an existing contract or someone who is going to act on behalf of a party.

Question 4

Novation

Answer 4

The substitution of a new obligation for an old one.

Question 5

Statute of limitations

Answer 5

Time frame set by state law where one party to a transaction has the right to take legal action against another party.

Question 6

Time is of the essence

Answer 6

Parties must live up to the time frames agreed to in the contract.

Question 7

Reality of consent

Answer 7

The contract must be entered into by a free and voluntary act. A mistake, fraud, misrepresentation or undue influence would deprive that person of that ability which can make the contract void or voidable.

Question 8

Bilateral Contract

Answer 8

Both parties agree to do something. (a residential resale contract is a good example of a bilateral agreement)

Question 9

Unilateral Contract

Answer 9

Only one party is bound by the agreement. (An option contract is a good example of a unilateral agreement)

Question 10

Breach of Contract

Answer 10

Violation of any of the agreed-upon terms and conditions of a binding contract.

Question 11

Contingencies

Answer 11

A contract provision that requires a specific event or action to take place in order for the contract to be considered valid.

Question 12

Counteroffer

Answer 12

A new offer that negates the original offer.

Question 13

Equitable Title

Answer 13

When an offer is accepted by the seller the buyer is entitled to the equity on the property but does not receive the legal title until the deed is delivered and accepted.

Question 14

Executed contract

Answer 14

Once the transaction closes it becomes executed.

Question 15

Executory Contract

Answer 15

When a buyer prepares an offer and a seller accepts it, it is in an executory state.

Question 16

Express Contract

Answer 16

These contracts can be in writing or verbal. The statute of frauds says that all contracts need to be in writing to be enforceable except leases of a year or less and broker to broker agreements.

Question 17

Implied Contracts

Answer 17

These are created by the parties actions and are not expressed. It takes the actions of both parties to create an implied agreement.

Question 18

Land Contract

Answer 18

A land contract is a private contract between the seller (vendor) and the buyer (vendee). The seller retains legal title until the final payment is made by the buyer, while the buyer retains equitable title to the property. AKA Contract for deed, Installment contract or an Agreement for Sale. No acceleration.

Question 19

Liquidated Damages

Answer 19

This provision allows for the payment of a specified sum should one of the parties be in breach of contract.

Question 20

Option Contract

Answer 20

Only one party is required to perform to the terms of the contract. This is a unilateral contract.

Question 21

Valid

Answer 21

Contains all of the required elements and is binding on all parties.

Question 22

Voidable

Answer 22

Can be rescinded by one of the parties but is not, in and of itself, void.

Question 23

Void

Answer 23

Has no legal or binding effect because it is missing one or more of the requirements for a valid contract.

Question 24

Unenforceable

Answer 24

This contract appears to be valid but is not legally enforceable by either party. A contract that is expressed verbally is unenforceable in a court of law based on the statue of frauds.

Question 25

Parole Evidence Rule

Answer 25

When parties to a real estate contract put their agreement into final written form, the parole evidence rule prevents the admission into court of any prior oral or written negotiations or agreements that vary or contradict the terms of the written contract.

Question 26

Elements of a Real Estate Contract

Answer 26

1. Competent parties
2. Legal Purpse
3. Meeting of the Minds
4. Consideration