Chapter 12 - Contracts and Contract Preparation

Question 1

As Is

Answer 1

Provision in purchase agreement where buyer accepts property in present condition without requiring seller to fix any problems or renegotiating if a problem is found.

Question 2

Assignment

Answer 2

One party in contract transfers rights/interest in contract to new party - original party still secondarily liable.

Question 3

Bilateral / Unilateral

Answer 3

Unilateral contract is where one party makes a binding promise to the other, bilateral both parties make binding promises to the other

Question 4

Consideration

Answer 4

Anything of value given to induce another to enter into contract.

Question 5

Contingency

Answer 5

AKA conditions - contract provisions that make rights or obligations dependent on the occurrence (or non-occurrence) of certain events.

Question 6

Contract

Answer 6

Agreement between two or more parties to do something.

Question 7

Earnest Money Deposit

Answer 7

Deposit accompanies an offer and conveys seriousness of buyer. If buyer doesn’t follow through with their purchase, seller keeps the deposit.

Question 8

Executed / Executory

Answer 8

Executory is where one or both parties have yet to fulfill their agreement, executed is once both have fully perform their contractual obligations

Question 9

Express / Implied Contract

Answer 9

Express is an agreement expressed in words (written or verbal), implied is not expressed in words but implied by actions

Question 10

Forbearance

Answer 10

Legally binding promise to refrain from doing a certain act.

Question 11

Land Contract

Answer 11

Installment sales contracts. Vendee makes payments to vendor in exchange for right to occupy and use property, but deed and title do not transfer until all or specified portion of payment is made.

Question 12

Liquidated Damages

Answer 12

Amount of money specified in contract to be awarded in event of a contract breach - lessens chance of expensive litigation.

Question 13

Meeting of the Minds

Answer 13

Acceptance of the terms of an offer so that a contract can be formed.

Question 14

Novation

Answer 14

Substitution of a new contract for an earlier one

Question 15

Offer / Counteroffer

Answer 15

Offer is made by buyer and seller may counteroffer with a compromised price or terms.

Question 16

Option

Answer 16

Unilateral contract giving one party the right to do something without requiring them to do so. EX: lease with option to purchase.

Question 17

Power of Attorney

Answer 17

Authorizes one person to act as another’s agent.

Question 18

Proprietary Lease

Answer 18

Longer terms than ordinary leases with more rights. Used in co-ops, title is held in corporation and buyers purchase shares in corporation vs. real property.

Question 19

Rescission

Answer 19

Destruction or termination of contract where all parties must give back anything acquired under it.

Question 20

Rider

Answer 20

Amendments to contracts.

Question 21

Right of First Refusal

Answer 21

Right to have first chance to buy or lease property if owner sells or leases. EX: co-ops

Question 22

Sales Contract

Answer 22

Seller promises to convey title to real property to a buyer in exchange for purchase price.

Question 23

Specific Performance

Answer 23

Legal remedy to breach of contract where court orders the breacher to perform as agreed rather than pay damage.

Question 24

Statute of Frauds

Answer 24

Law requiring certain types of contracts to be in writing and signed in order to be enforceable.

Question 25

Statute of Limitations

Answer 25

6 years - time limit to bring legal action to matters regarding real estate contracts

Question 26

Time is of the Essence

Answer 26

Emphasizes timely performance as an essential part of a contract - failure to perform is a material breach.

Question 27

Void / Voidable

Answer 27

Void is where an contract lacks one or more essential elements for contract formation (like an owner’s signature on a listing agreement to sell a house). Voidable is where one party can end a contract without liability because of lack of legal capacity, fraud, or duress (party is a minor).

Question 28

Material breach

Answer 28

Breach of contract important enough to excuse the other party from any contractual obligations

Question 29

Substantial performance

Answer 29

Promisor doesn’t meet all contractual obligations but does enough so that promisee is required to fulfill obligations - but they may sue for damages for unfulfilled details.