Chapter 11 Flashcards
What are the elements of a valid contract?
Two or more competent parties
In agreement
About a lawful subject
For a consideration ($$)
Who is the offeror in a contract?
The buyer, it is the party who makes an offer
Who is the offeree in a contract?
The seller, they are receiving the offer
What are the steps required to create a contract?
Offer has to be made
Offer has to be accepted
Offer acceptance needs to be communicated back to the offeror
What happens to the original offer when a counteroffer is made?
Original offer is terminated by a counteroffer
Who is the offeror when the seller makes a counteroffer?
The seller becomes the offeror
What is valuable consideration?
anything with monetary value that is or can be converted into money
What is good consideration?
Type of consideration that cannot be expressed in terms of money, like love and affection
What are the permissible forms of a contract?
verbal (parol)
Written
What does the statute of frauds say a contract needs in order to be enforceable?
it needs to be in writing.
How long is the statute of limitations for oral/written contracts?
4 years for oral
5 years for written
What is an express contract?
Contract that exists when all terms and conditions are specified and agreed to by the parties (complete understanding exists)
What is an implied contract?
Contract that exists when the terms and conditions can be assumed by the nature of the agreement or the words and actions of the parties
What is a bilateral contract?
Contract that exists when both parties of the contract mutually agree to be bound to performance of the terms and conditions specified
What is a unilateral contract?
Contract that exists when only one party agrees to perform an act and is the only one bound by the terms of the contract
What is Executory? in terms of a contract
The status of a contract when any term or condition remains to be performed
What is executed? in terms of a contract
Status of a contract when all the parties have fully performed according to the terms and conditions of the contract
What can terminate an offer?
Withdrawal before it is accepted/communicated
Insanity of either party
Lapse of time
Death of either party
Counteroffer
Acceptance
Rejection
Destruction of the property
What can terminate a contract?
Breach
Revocation
Renunciation
Lapse of time
Abandonment
Performance
What is a suit for cancellation?
Legal action that can be taken by a party who is not in breach of contract, asking the court to cancel the contract and put parties back in their original position
What is a suit for specific performance?
Legal action that can be taken by a party who is not in breach of contract to require the other party to perform as agreed in the contract
What is suit for damages? (Compensatory damages)
Legal action that can be taken by the injured party to request compensation for financial loss
What are liquidated damages?
Type of damages that are agreed to by the parties in the contract in the event of a breach by either party
What are unliquidated damages?
Type of damages that are not specified in the contract but are determined by a court
What is an equitable title?
Type of title that is acquired by the buyer as a result of having entered into a binding contract to purchase a property
What is an exclusive right of sale listing?
Type of listing agreement where the seller lists the property with only one broker and agrees to pay commission to that broker no matter who sells the property
What is an open listing?
Type of listing agreement where the seller promises to pay commission to any broker who brings a successful buyer
What is an exclusive listing?
Type of listing agreement where the seller lists the property with only one broker but reserves the right to sell the property themselves without paying a commission
Which type of listing agreement provides the best protection to the broker’s commission?
Exclusive right of sale listing
What is an example of a bilateral contract?
Real estate sales contract
Exclusive right of sale listing agreement
Exclusive agency contract
Lease agreement
What is an example of a unilateral contract?
Option Contract
Open listing
What is in a commercial sale written listing agreement that protects the broker’s commission?
That the broker has a lien against the seller’s net sales proceeds upon performance by the broker
What is in a commercial lease agreement that protects the broker’s commission?
That the broker has a lien against the owner’s interest in the commercial real estate
What is a unique aspect of a net listing?
Seller specifies the amount they want to receive upon the sale of the property after the broker’s commission and closing costs
What can terminate a listing?
Breach
Renunciation (mutual consent needed)
Revocation
Lapse of time
Abandonment
Performance
Destruction of the property
Death or insanity
Bankruptcy
When does a broker that was employed to effect a sale get their commission?
When they locate a potential purchaser and the title successfully passes from seller to buyer at closing
When does a broker that was employed to find a purchaser get their commission?
When they find a ready, willing, and able purchaser, whom signs a binding contract
What is a unique aspect of an option contract?
Potential buyer has the right but is not obligated to buy the property during a specified period of time at a specified price
Who are the parties to an option contract?
Optionor - seller
Optionee - buyer
What is option money?
Consideration ($$) given to the optionor (seller) by the optionee (buyer) in an option contract to sustain an enforceable agreement
What is a contract for deed? a.k.a. agreement for deed, land contract, conditional sales contract, or installment sale contract
contract which is a type of seller financing where the seller (vendor) holds the title while the buyer (vendee) makes payments to the seller
What is a unique aspect of an “as is” contract
The seller does not agree to pay for any repairs. Material facts must still be disclosed
Which type of contracts can a real estate licensee prepare without additional licensing?
Listing contract
Sales contract
Option Contract
Buyer representation agreements
