Chapter 11: Real Estate Contracts Flashcards
Essentials of a Valid Contract
What are the 4 essential of a valid contract?
- Lawful subject (must be lawful)
- Offer and acceptance (meeting of the minds/agreement/mutual understanding of terms)
- Consideration (valuable or good consideration/future money)
- Competent parties
Creation of a Contract
When is a contract created?
When an offer is accepted and acceptance is communicated
Statutes of Fraud
When and where was the statutes of fraud enacted?
1677 in England
Statutes of Fraud
Why was the statutes of fraud enacted?
To provide protection against fraud in sale of real property
Statutes of Fraud
What is required of a contract according to the statutes of fraud?
Requires a contract for the transfer of a right/interest in land to be in writing in order to be enforceable
Statute of Limitations
What does the statute of limitations provide for?
Time limits during which parties are allowed to bring legal action to enforce their rights under contract
Statute of Limitations
What are the time periods (statute of limitations) allowed for oral and written contracts
ORAL = 4 years
WRITTEN = 5 years
Classification of Contracts: Express vs. Implied
When is a contract considered to be an express contract?
When all terms/conditions are specified and agreed to (oral or written)
Classification of Contracts: Express vs. Implied
When is a contract considered to be an implied contract?
When some or all terms/conditions can be assumed by the nature of the agreement or words/actions of the parties (oral or written)
Classification of Contracts: Bilateral vs. Unilateral
When is a contract considered a bilateral contract?
Both parties agree to be bound to performance of terms and condition specified (a promise for a promise)
Classification of Contracts: Bilateral vs. Unilateral
When is a contract considered a unilateral contract?
Only one party expressly agrees to perform an act (promise given in exchange for an act)
Classification of Contracts: Executory vs. Executed
When is a contract considered to be executory?
If any term or condition remains to be performed
Classification of Contracts: Executory vs. Executed
When is a contract considered to be executed?
When all parties have fully performed
Classification of Contracts: Formal vs. Informal (Parol)
When is a contract considered to be formal?
When it’s written, contains all elements of a valid contract, and may be recorded in public record
Classification of Contracts: Formal vs. Informal (Parol)
When is a contract considered to be informal?
When it’s oral or a partially written contract that may or may not contain all elements of a valid contract and is not recorded in public record
Classification of Contracts: Void vs Voidable
When is a contract considered void?
When it’s inherently unenforceable; cannot be performed under the law
Classification of Contracts: Void vs Voidable
When is a contract considered voidable?
An enforceable valid agreement; however, one or both parties can cancel or revoke the contract at any time
Classification of Contracts: Void vs Voidable
What are some reasons that can make a contract voidable?
Failure to disclose material fact
A mistake, misrepresentation, or fraud
Coercion, undue influence, duress
Lack of capacity (intoxication or other impairment)
Breach of contract
A minor enter into contract w/ an adult
Contract Negotiation: Offer and Counteroffer
The party who make an offer is called the _________.
Offeror
Contract Negotiation: Offer and Counteroffer
The party who receives the offer is the ___________.
Offeree
Contract Negotiation: Offer and Counteroffer
If the offeree changes any of the term of the original offer it becomes a ____________.
Counteroffer
Contract Negotiation: Termination of Offers
How may an offer be terminated?
Acceptance (accepted offer becomes a contract)
Withdrawal (can withdraw offer at any time up to acceptance of offer is communicated)
Rejection or counteroffer (offeree rejects offer or offers counteroffer)
Lapse of time (end of specified time to accept)
Death or insanity
Destruction of property (by fire/natural disaster)
Contract Termination
What are the 6 ways a contract can be terminated?
Breach (failure to meet obligations/perform as agreed)
Revocation
Renunciation (mutual consent to terminate agreement)
Lapse of time
Abandonment (party walks away from contract and does nothing toward performance/completion
Performance (both parties perform as agreed, fulfills required obligations)
Legal Remedies for Breach of Contract
What 3 legal remedies exists to allow an injured party to suit to enforce rights created by an agreement/contract?
Suit for cancellation
Suit for specific performance
Suit for damages
Legal Remedies for Breach of Contract
In this remedy, the party not in breach can sue to cancel the contract and ask the court to put the parties to their original positions
Suit for concellation
Legal Remedies for Breach of Contract
In this remedy, the party not in breach asks the court to make the the other party perform as agreed in the contract; usually available in connection with sale of real estate
Suit for specific performance
Legal Remedies for Breach of Contract
In this remedy, the party not in breach can sue for damages; it is a request to court to be financially compensated
Suit for damages
Types of Damages
What are the 2 types of damages?
Liquidated and unliquidated
Types of Damages
What are the characteristics of liquidated damages?
Penalty to be imposed in the event of a breach is specified and agreed in contract; usually involves seller keeping the deposit if buyer defaults
Types of Damages
What are the characteristics of unliquidated damages?
Penalty not specified and agreed in contract but are determined by the courts
Assignments of Contract
The sale, transfer, or subjugation of rights in a contract is called an _____________.
Assignment
Assignments of Contract
True or False
An assignment of a contract is a NOT a legal remedy for a breach of contract.
True
As Is Contracts
Sellers of residential property in Florida are required to disclose any material defects (any fact that could have significant/reasonable impact on property value). Does the use of an “as is” provision relieve the seller of this responsibility?
No (Johnson v. Davis: Supreme Court of Florida)
As Is Contracts
What does an “as is” provision relieve the seller of having to do?
It relieves the seller from having to make any repair discovered during the inspection process
Disclosures Required in Sales Contracts
List required disclosures in sales contracts
Known material facts affecting value
Lead-based paint
Radon
Energy-efficiency rating
Property tax
Foreign Investment in Real Property Act (FIRPTA)
Listing Contracts
What is a listing contract?
An employment agreement between broker and owner of real estate
Written Listing Contracts
What elements must a written listing contract contain?
Definite termination date
Legal description
Price and terms
Broker’s fee or commission
Signature of property owner(s)
Types of Listing Contracts
List the 5 types of listing contracts
Open listing
Exclusive agency listing
Exclusive right of sale listing
Commercial listing
Net listing
Types of Listing Contracts
Which listing contract is most favorable listing for the sales agent/broker?
Exclusive right of sale
Types of Listing Contracts
Which listing contract is a unilateral contract where the property owner promises to pay commission if broker finds a buyer
Open listing
Types of Listing Contracts
True or False
An owner can give an open listing to any number of brokers for the sale of same property
True
Types of Listing Contracts
Which listing contract is bilateral in nature in which the property owner promises to list the property with only 1 broker and further promises to pay the commission if the broker successfully sells the property
Exclusive agency
Types of Listing Contracts
Which listing is bilateral in nature in which the property owner promises to pay a commission regardless of who sells the property
Exclusive right of sale listing
Types of Listing Contracts
True or False
Any type of listing contract may be structured as a net listing
True
Types of Listing Contracts
What are the characteristics of a net listing?
Property owner agrees to accept stipulated amount and no less called the seller’s net;
Broker keeps all money over seller’s net as a commission
Option Contracts
What is an option contract?
A right to buy a property during specified time period at specified price
Types of Listing Contracts
True or False
An option contract is an obligation to buy a property; it is a right that must be exercised.
False
An option contract is NOT an obligation to buy a property; it is a right that MAY OR MAY NOT be exercised.
Contract for Deed (Installment Sale Contract)
A _________ ___ _____is an agreement between a property owner and potential buyer in which the owner agrees to deliver a deed to the purchaser after certain conditions have been met.
contract for deed
