Chapter 4 - Contracts: The Basics Vocabulary Flashcards
Chap 4 Vocab
abrogation
(1)The rescission or annulling of a contract. (2) The revocation or repealing of a contract by mutual consent of parties to the contract, or for cause by either party to the contract. (Pronounced ab-ro-ga-tion)
Acceptance
When a party agrees to the terms of an offer to enter into a contract, thereby creating a binding contract. An unqualified agreement to the terms of an offer.
Actionable Fraud
Fraud that meets certain criteria, so that a victim can successfully sue. The victim must prove the defendant concealed material facts or made false statements (intentionally or negligently) with the intent to induce the victim to enter a transaction, and the victim was harmed by relying on misrepresentations.
Actual Fraud
An intentional misrepresentation or concealment of a material fact; when a person actively conceals material information or makes statements that he knows are false or misleading.
addendum
Additional documents attached to and made part of a contract.
Adequate Consideration
Consideration that is comparable in value to the consideration the other party to the contract is giving.
Anticipatory Repudiation
When one party to a contract informs the other before the set time of performance that he or she doesn’t intend to perform as agreed. The other party may immediately file a lawsuit for breach of contract without making a tender offer. Also called Anticipatory Breach.
Antitrust
An area of federal law concerned with maintaining competition in private markets by prohibiting unlawful restraint on trade.
assignee
Party to whom a lease is assigned or transferred.
Assignment
- The transfer of rights or interests under a contract to another party. 2. A valuation service that is provided by an appraiser as a consequence of an agreement with a client.
assignor
The person transferring a claim, benefit or right in property to another.
Bilateral Contract
A contract in which both parties make a binding promise to the other. each person promises to perform an act in exchange for another person’s promise to perform.
Binder
An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intent to complete the transaction. It is important to note a binder is not a sales contract. It is used, however, by attorneys as the blueprint for creating a sales contract.
Boycott
A concerted refusal by two or more people to deal with a particular person or company.
Breach
Violation of an obligation, duty, or law.
Breach of Contract
Failure, without legal excuse, to perform any promise which forms the whole or part of a contract. – A failure to perform on part or all of the terms and conditions of a contract.
Breach of Trust
The failure by someone entrusted with care or property of others to discharge the duties imposed on them under the terms of an agreement or other obligation; may be malicious or due to negligence or carelessness.
Cancellation
Termination of a contract without undoing acts that have been performed under it; can be done without going to court.
Collusion
Secret agreement or cooperation among people, especially for deceitful or fraudulent purposes.
Concealment
Occurs when a licensee fails to disclose information that is material to a decision to a party to whom the licensee has such a duty.
Consideration
Anything of value—such as money, goods, services, or promises—that is given to induce another person to enter into a contract. Also called Valuable Consideration. – Something of value—such as money, a promise, property or personal services.
Constructive Fraud
A negligent misrepresentation or concealment of a material fact; when a person carelessly fails to disclose material information or makes statements that she should realize are false or misleading. Also called Negligent Misrepresentation. – A breach of duty legally declared fraudulent because it deceives others despite no dishonesty nor deceptive intent.
Contract
An agreement between two or more parties to do, or not do, something. Contracts are legally enforceable promises, with the law providing remedies for breach. – A legally enforceable agreement made by competent parties, to perform or not perform a certain act.
Contractual Capacity
The legal ability to enter into a contract.
Counteroffer
A response to an offer to enter into a contract, changing some of the terms of the original offer. A counteroffer is a rejection of the original offer (not a form of acceptance) and does not create a binding contract unless the new counteroffer is accepted by the original offeror. – (1) The rejection of an original offer that becomes a new offer. (2) The rejection of an original purchase offer and the submission of a new and different offer.
Counterofferee
A person who receives a counteroffer or to whom a counteroffer is made.
Counterofferor
A person who makes a counteroffer.
Culpable Negligence
Occurs if a licensee operates in a reckless, careless, and excessively negligent manner. Culpable negligence is for which one can be held legally accountable.
definite and certain
Precise acts to be performed are to be clearly stated.
discharge of contract
The cancellation or termination of a contract.
Discharge of Mortgage
Required once a borrower’s loan is paid off. The lender issues the discharge of contract, and the borrower should record this document. Also called Release of Lien or Satisfaction of Mortgage.
Duress
The use of force or improper actions, against a person or property, in order to induce a party to enter into a contract.
Earnest Money
Money offered as an indication of good faith regarding the future performance of a purchase agreement.
emancipated minor
Someone who is legally set free from parental control/supervision.
Executed Contract
A contract in which both parties have fully performed their contractual obligations.
Executory Contract
A contract in which one or both parties have not yet completed performance of their contractual obligations.
Express Contract
An agreement that’s been expressed in words, either spoken or written.
false promise
A false statement of fact.
Forbearance Agreement
When the lender agrees to temporarily reduce, postpone, or suspend the mortgage payment and not proceed with foreclosure as long as the borrower brings the loan current within the specified time – (1) Refraining from action by a creditor against a debt or after the debt has become due. (2) Forgiving a debt or obligation.
Fraud
A material misrepresentation that is known to be false or made recklessly, is made to induce an act, induces an act in reliance on the misrepresentation, and causes injury. Also called Fraudulent Dealing. – An act meant to deceive in order to get someone to part with something of value.
hold harmless clause
Protects the broker from incorrect information.
Implied Contract
An agreement that hasn’t been put into words but is implied by actions of the parties.
innocent misrepresentation
When a person unknowingly provides incorrect information.
Inquiry Notice
When circumstances should have alerted someone to a possible problem prompting further investigation, a person may be held to have had notice of the problem even if he or she does not have actual knowledge of it.
Interstate Land Sales Full Disclosure Act
A federal law that protects consumers from fraud and abuse in the sale or lease of land. The Act is regulated by the U.S. Department of Housing and Urban Development (HUD) and attempts to prevent marketing schemes that entice consumers to purchase land sight unseen.
Invalid
Without legal force.
Irrevocable
Not capable of being changed or terminated.
Laches
The loss of a right through undue delay or a failure to assert. – Delay or negligence in asserting one’s legal rights.
Land Contract
A real estate installment agreement under which the buyer (vendee) makes payment to the seller (vendor) in exchange for the right to occupy and use the property. No deed or title is transferred until all, or a specified portion of, payments have been made. Also called Agreement for Sale, Installment Sales Agreement, Contract for Deed, or Land Sales Contract. – (1) A contract for the sale of real property where the seller gives up possession, but retains the title until the purchase price is paid in full. (2) Also known as a contract of sale or agreement of sale.
Lawful and Possible Objective
The purpose or objective of a contract must be lawful at the time the contract is made.
Market Allocation
An antitrust violation where competitors agree to not compete with each other in specific markets by dividing up geographic areas, types of products, or types of customers. Also called Territory Allocation.
Material Breach
An unexcused failure to perform according to the terms of a contract that are important enough to excuse the non-breaching party from performing her contractual obligations.
Meeting of the Minds
When all parties involved agree to the terms of a contract. This is achieved through offer and acceptance. Also called Mutual Agreement or Mutual Consent.
Menace
Using the threat of violence to get agreement in accepting a contract.
Minor
A person under l8 years of age. – One who has not attained the age of majority in a state and does not have legal capacity to be bound by most contracts.
Mistake
(1) An agreement was unclear or there was a misunderstanding in the facts. Mistake does not include ignorance, incompetence or poor judgment. (2) An error or misunderstanding.
Mitigation
Action taken by the non-breaching party to minimize the losses resulting from a breach of contract.
mutual consent
(1) The offer by one party and acceptance by another party. (2) Also known as mutual assent or meeting of the minds.
mutual rescission
When all parties to a contract agree to cancel an agreement.
Negligence
Conduct that falls below the standard of care that a reasonable person would exercise under the same circumstances; an unintentional breach of a legal duty resulting from carelessness, recklessness, or incompetence. – Untrue statements made without facts to back them up.
Novation
The substitution of a new contract for the original contract. Both parties must give their consent.
Null and Void
Invalid and unenforceable. no legal validity or effect
Offer
The first step in forming a contract when one party makes an offer to another party. An offer requires intent to contract and definite terms.
Offer and Acceptance
The necessary elements of mutual assent; for example, an agreement of one party to buy and another party to sell.
offer to purchase
The proposal made to an owner of property by a potential buyer to purchase the property under stated terms.
Offeree
A person who receives an offer or to whom an offer is made.
Offeror
A person who makes an offer.
Parol Evidence
Evidence concerning negotiations or oral agreements that were not included in a written contract, altering or contradicting the terms of the written contract. – (1) Oral or written negotiations made prior to a dispute about an executed contract and brought forward to influence the executed contract. Parol mean oral or by word of mouth but in this case means any evidence outside of the writtenagreement. (2) Prohibits introducing any kind of outside evidence to change or add to the terms of deeds, contracts or other writing once they have been executed.
Partial Performance
A potential remedy to breach of contract where the injured party agrees to accept less than the full terms of the original contract. Also called Accord and Satisfaction.
Preapproval
The formal process by which a lender determines if potential borrowers can be financed through the lender, and for what amount of money. Preapproval is generally binding on the lender.
Prequalification
The informal process of determining how much a potential homebuyer might be eligible to borrow.
Principal
- The person who gives authority to an agent, thereby creating an agency relationship. Also called Client. 2. The sum of money loaned to a borrower; the outstanding balance of a loan. (1) In a real estate transaction, the one (seller) who hires the broker to represent him or her in the sale of the property. (2) The amount of money borrowed.
Recital
An element in a deed that identifies how and when the grantor took title to the property. Also called Source Clause.
Rejection
An irreversible refusal of an offer by an offeree.
Rescission
The termination of a contract with each party giving anything acquired under the contract back to the other party (verb form is to rescind). Legal action taken to repeal a contract either by mutual consent of the parties or by one party when the other party has breached a contract.
Restitution
The return of consideration by both parties when a contract is rescinded.
Revocation
- The cancellation of an offer by its withdrawal. Verb form: To revoke. 2. The permanent cancellation of a real estate license. Rider An addition, amendment, or addendum to a document or contract. The canceling of an offer to contract by the person making the original offer.
Revoke
Recall and make void.
Severable
The concept that one part or provision of a contract that can be held unenforceable without making the entire contract unenforceable.
Slander
Defamation of another’s character or reputation through that which is spoken or heard.
Specific Performance
Legal remedy in which a court orders someone who has breached a contract to perform as agreed, rather than paying monetary damages. An action brought in a court to compel a party to carry out the terms of a contract.
Statute
A law passed by a state legislature.
Statute of Frauds
A state law that requires certain types of contracts to be in writing and signed to be enforced. A state law which requires that certain contracts must be in writing to prevent fraud in the sale of land or an interest in land.
Statute of Limitations
A law requiring parties to file a particular type of lawsuit within a specified time after the event giving rise to the suit occurred. The period of time limited by statute within which certain court actions must be brought by one party against another.
Substantial Performance
When a promisor doesn’t perform all of his contractual obligations but does enough so that the promisee is required to fulfill her part of the deal.
Tender
An offer by one of the parties to a contract to carry out his or her part of the contract.
Tendering Performance
An unconditional offer by one party to perform his part of a contract. Also called Tender.
Time is of the Essence Clause
A clause added to a contract that voids the contract when the deadline passes. The party that fails to perform by the deadline is in material breach of the contract.
Undue Influence
When a person in a fiduciary capacity or in a position of authority misuses the trust or power in order to unfairly induce a party to enter into a contract.
Unenforceable Contract
A contract that a court would refuse to enforce. Some oral contracts or vaguely worded contracts could be deemed unenforceable. cannot be proved or will not be enforced by a court.
Unilateral Contract
A contract in which only one party is legally bound. A contract where a party promises to perform without expectation of performance by the other party.
unilateral rescission
Legal action taken to repeal a contract by one party when the other party has breached a contract.
Valid
Legally binding
Valid Contract
A binding, legally enforceable contract. It meets all of the legal requirements for contract formation.
Valuable Consideration
Anything of value offered as an inducement. Each party to a contract must give up something to make the agreement binding.
Void
An agreement which is totally absent of legal effect.
Void Contract
A contract that isn’t enforceable because it lacks one or more of the requirements for contract formation or is otherwise defective.
Voidable
An agreement which is valid and enforceable on its face, but may be rejected by one or more of the parties.
Voidable Contract
A contract that one of the parties can end without liability because of a lack of legal capacity or other factors such as fraud or duress.
Waive
(1) To abandon. (2) To relinquish a right to enforce or require anything.
Waiver
The relinquishment or refusal to accept a right.
