5 Contracts Flashcards
Binder
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.
Assignment
Transferring the legal rights from one party to another. In real estate, contracts are usually assignable unless they state not for assignment.
Earnest money
Good faith money put up by the buyer that can be forfeited to the seller in case of a breach by the buyer.
Nominee
A party who will be added to an existing contract or someone who is going to act on behalf of a party.
Novation
The substitution of a new obligation for an old one.
Statute of limitations
Time frame set by state law where one party to a transaction has the right to take legal action against another party.
Time is of the essence
Parties must live up to the time frames agreed to in the contract.
Reality of consent
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.
Bilateral Contract
Both parties agree to do something. (a residential resale contract is a good example of a bilateral agreement)
Unilateral Contract
Only one party is bound by the agreement. (An option contract is a good example of a unilateral agreement)
Breach of Contract
Violation of any of the agreed-upon terms and conditions of a binding contract.
Contingencies
A contract provision that requires a specific event or action to take place in order for the contract to be considered valid.
Counteroffer
A new offer that negates the original offer.
Equitable Title
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.
Executed contract
Once the transaction closes it becomes executed.
Executory Contract
When a buyer prepares an offer and a seller accepts it, it is in an executory state.
Express Contract
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.
Implied Contracts
These are created by the parties actions and are not expressed. It takes the actions of both parties to create an implied agreement.
Land Contract
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.
Liquidated Damages
This provision allows for the payment of a specified sum should one of the parties be in breach of contract.
Option Contract
Only one party is required to perform to the terms of the contract. This is a unilateral contract.
Valid
Contains all of the required elements and is binding on all parties.
Voidable
Can be rescinded by one of the parties but is not, in and of itself, void.
Void
Has no legal or binding effect because it is missing one or more of the requirements for a valid contract.
Unenforceable
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.
Parole Evidence Rule
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.
Elements of a Real Estate Contract
- Competent parties
- Legal Purpse
- Meeting of the Minds
- Consideration
