Chapter 11 - Real Estate Contracts Flashcards
Bilateral contract
Both parties promise to do something; a promise is given in exchange for another. A real estate contract is a bilateral contract because the seller promises to sell and deliver the title who promises to pay a certain sum.
Assignment
Refers to a transfer of rights and/or duties under a contract. Unless a contract specifically forbids it, rights may be assigned to a third party. most contracts either stipulate permission or not. In the case of assignment the assignor maintains secondary liability if the assignee breaches the contract.
Breach of contract
a violation of any of the terms or conditions of a contract without legal excuse, as when a seller breaches a sales contract by not delivering title to the buyer under the conditions in the agreement. If the seller defaults the buyer has three options. (1) Buyer may rescind or cancel and recover the earnest money deposit (2) sue for specific performance, to force the seller to perform the contract and convey the property and (3) the buyer may sue the seller for compensatory damages. If the buyer may pursue one of four courses (1) The seller may declare the contract forfeited and seller may be entitle to retain earnest money and all payments received as liquidated damages, (2) rescind the contract as if it was never made, which requires return of all payments, (3) sue for specific performance which may require the seller to offer,or tender a valid deed to show seller compliance with the contract terms and (4) sue for compensatory damages.
Competent parties
In New jesrey to enter into a binding contract, person must be 18 years and of sound mind. A married person is considered an adult. Persons under age 18 may enter into a valid contract, but the contract is voidable by the minor until a reasonable time after he or she reaches the age of 18.
Consideration
Is what the parties promise in the agreement to give to or receive from each other. May consist of legal tender, exchange in value, or love and affection. the price must be definitively stated and payable in exchange for the deed or right received.
Contingency
Certain happening without which a contract will not be valid (subject to’s)
Counter offer
Any new offer made as a reply to an offer.
Earnest money
The cash deposit customarily but not essential when making an offer to purchase real estate which gives evidence of the buyer’s intention to carry out the terms of the contract. must be deposited by a broker into a trust, escrow, bank account within five business days. This money may not be commingled or mixed with a brokers personal funds. A broker may not use such funds for personal use. This is an illegal act know as conversion. any cash deposit of $10,000 ormore must be reported to the IRS.
Equitable title
The interest held by a vendee (a buyer under a land contract or contract of sale) under a land contract or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another’s name.
Escape clause
Protection for seller with a contract is subject to the sale of buyer’s present home.
Executed contract
Contracts in which both parties have fulfilled their promises and thus performed the contract.
Executory contract
Exists when something reamins to be done by one of the parties. A real estate contract is executory before final settlement and closing.
Express contract
The parties state the terms and show their intentions in words.
Implied contract
The agreement of the parties is demonstrated by their acts and conduct. The patron in a restaurant orders a meal and has implied a promise to pay for the food. A listing agreement is an express contract between principal (buyer and seller) and the broker that names the broker as the principal’s fiduciary representative.
Land contract
Sometimes referred to as a contract for deed or an installment sales contract. land contracts are typically used as a means of seller financing. Typically the seller (vendor), retains fee ownership and the buyer, known as the vendee, secures possession and an equitable interest in the property.