Chapter 11 Flashcards
What is a contract?
If it is in writing, and contains all the valid essentials, it is also enforceable.
What is the statue of frauds?
protects consumers from fraud. It says that all contracts must be in writing to be enforceable and that all leases for more than one year must be in writing to be enforceable
What is the statue of limitations?
provides a time frame which court cases must be filed on certain offenses. If the Statute of Limitations runs out, the case cannot be heard
What are the essential parts of a contract to be valid?
- Legally competent parties
- Offer and acceptance - meeting of the minds
- Consideration
- Legality of object - purpose of the contract, rent, sell, buy, etc.
When is an contract valid?
an offer to purchase is not a contract. When an offer or counter offer is mutually agreed upon and the seller and/or buyer have signed and dated the final change, the offer becomes a valid contract.
Contract Valid means
it is binding and enforceable on all parties. All essentials of a contract are in place.
Contract is void means
has no legal effect. One of the essential elements is missing or is corrupted.
Voidable means
is valid on the surface but may be rejected by one of the parties due to an error or misinformation. A voidable contract requires court action on the part of the injured party to correct the problem.
Enforceable means
that all of the essentials of a contract are present and that the contract is in writing. This is a contract that can be heard by the court.
Unenforceable means
means the contract may be valid between the parties (such as a handshake agreement), that all the essential elements are in place but the contract is not in writing.
To be enforceable, a contract must have four major components, which are:
- Legal purpose and competency,
2. Offer and acceptance and consideration, and be in writing.
What is earnest money?
It is only a good faith deposit to ensure the seller that the buyer will honor his promises and complete the sale. A deposit or escrow is NOT required to create a valid contract.
What is equitable title?
The interest a buyer has in a property between the time of acceptance (notification) of the contract and the actual closing. When the transaction closes,
What are the types of contracts?
- Bilateral - each party of the contract promises to do something
- Unilateral - one way contract
- Expressed - is a contract, oral or written which contains specific terms and conditions
- Implied - is a contract which occurs by the actions of the parties
- Executory - is a contract in process
- Executed - is a contract completed
- Formal contract - was originally written under seal, meaning the wax seal of the parties.
- Informal contract - an oral or parol contract usually not enforceable
What are the ways to terminate an offer?
An offer is withdrawn by the offeror.
The time for an offer has passed and the offer is dead.
The death or insanity of either party.
A counter offer is given, making the first offer dead.
The offer is accepted and signed by both parties,
creating a CONTRACT.
The offer is rejected by one party completely.
The property in question is destroyed.
How can a contract be terminated?
- Performance: the contract is completed
- Mutual rescission: both parties agree to cancel the contract.
- Impossibility of performance:
- Operation of Law: bankruptcy of either party or eminent domain of the property.
- Breach: one or the other or both of the parties have broken the promises made.
An injury party may seek remedy for damages by one of the following methods:
- Suit for Cancellation: (Rescind the contract) the court restores the parties to their original position before the contract.
- Suit for Specific Performance: Because no two pieces of property are alike, the buyer wants this house, at this time and asks the court to enforce the contract.
- Suit for Damages: Because a party may have expenses to the contract (such as an appraisal or moving) the injured party asks the court to make the other party pay damages
What is an assignment of contract?
when a third person takes the place of one of the original people in the contract.
What is Novation?
is a change in the original terms, such as an extension of time for closing or loan commitment. All other terms of the contract remain the same.
What is contingency?
means conditions or terms yet to be performed.
What is Mirror Image?
A seller agrees to an offer exactly as it was written. No changes are made to the offer; it is signed by the seller as it was written.
What is a Counteroffer?
is an attempt by the seller or buyer to change the terms proposed by the other party
What is deemed as Time is of the Essence?
means the promises must be performed with a certain time frame or the party will be in breach of contract.
What is the Parol Evidence Rule?
anything in writing (like the contract) takes precedence over oral or verbal agreements.
What must be included in any written listing agreement?
a definite expiration date; proper identification of the property; price, terms and conditions; fee or commission to be paid; signature of the owner and the broker or his agent.
What is a unilateral contract?
When the seller sells the property without the broker, he pays no commission. In other words, the seller does it all.
There are two types of listing agreements
Exclusive Agency Listing - seller can get commission if he or she procures the buyer.
The listing broker is always entitled to a commission
What conditions entitle the broker to a commission?
A ready, willing and able buyer = commission
What conditions terminate a listing?
“The property sold!”
Expiration of the time as stated in the agreement - “Too late!”
Renunciation by the broker - “I quit!”
Revocation by the seller- “You’re fired!”
Transfer of title by operation of law- Foreclosure
Mutual Consent- “Let’s quit, this was a bad idea!”
Death or incapacity of either the seller or the broker*
Destruction of the property or a change in use by outside forces-“The property has been zoned commercial, now!”
Bankruptcy of the seller
What elements must be included in a buyer brokerage agreement?
Names of the parties Definite beginning and expiration date Terms and conditions of employment General description of the property sought Retainer or compensation Type of broker-buyer relationship Signatures of the parties
What must be contained in a sales contract?
names of the parties (seller and buyer)
legal description of the property or street address or both
consideration given/purchase price
financing or cash terms
quality and evidence of title to be conveyed
name, phone number and address of the Escrow holder
type of deed to be used- General Warranty is presumed unless otherwise stated
Estate to be acquired - Fee simple unless otherwise noted
terms of expenses and statement of prorations
any personal property to be included
date, time and place of closing
when possession will occur
signatures of the parties
any disclosures required by law
Does Earnest Money binds a contract?
No
What disclosures must be made to a buyer prior to the purchase of a property according to state and federal law?
Radon gas Energy Efficiency brochure Lead-based paint disclosure Home owner's association disclosure Flood insurance disclosure Condominium and cooperative disclosure Building code violation disclosure
What is an installment contract?
It is a bilateral contract and can be called a Contract for Deed
Who is exempt from do not call?
Political organization Charities Telephone survey firms Business telephone numbers Legitimate calls made to For Sale by Owners
What is Safe Harbor?
A policy manual within the brokerage directing action of sales associate
