Chapter 5 - Contracts Flashcards
This type of contract is expressed in words, either oral or written.
Express contract; listings, purchase agreements and leases.
Bilateral contract is promise for a ______.
promise
Unilateral contract is a promise for an ____.
act
An exclusive listing contract is a _____, _____, _______ contract.
expressed, bilateral, executory contract
4-5 elements of a contract; performance and money don’t count as part of it.
- capacity
- mutual consent
- legality
- consideration
- (in real estate) written; due to statute of frauds
A buyer can withdraw his or her offer at any time _____ to receiving communication (in writing, personally, or mail) of its acceptance and receive a refund of the money deposited.
prior to receiving communication
An illusory contract is one in which the terms are not definite and certain, therefore the contract is __________.
unenforceable
If a contract is signed under duress, it is _______.
voidable
________ ___________ in a contract is anything of value given by one party given by one party to another party to make the agreement binding.
Valuable consideration; anything adequate, valuable, good and sufficient related to consideration.
______ of ______ requires most real estate contracts to be in writing.
Statute of Frauds
Any contract (such as personal property contracts, aka leases) that can’t be performed within _______ from the date of signing must be in writing.
a year
An _________ is the transfer of a person’s right in a contract to another party.
Assignment; any contract, unless it calls for some personal service, can be assigned if the contract does not state otherwise.
A ___________ is the substitution or exchange (by mutual agreement of the parties) of a new obligation or contract for an existing one with intent to cancel the old contract.
Novation; the substitution, by agreement, of a new contract for an old one.
_________ is the canceling of an offer to contract by the original offeror.
Revocation.
When a contract is _________ rescinded, the deposit must be returned to the buyer immediately.
mutually rescinded
Contract can be cancelled due to Operation of Law (according to Statutes)
- illegality
- impossibility of performance
- rejection by bankruptcy
- failure of key contingency
- statute of limitations
What must/can the seller do to a buy who entered a legally binding purchase contract, but backed out within a week.
- sue buyer for money damages
- return deposit to the buyer
- must attempt to resell ASAP to minimize damages
What are the 4 remedies for a breach?
- acceptance of breach
- unilateral rescission
- action for dollar damages
- possible action for specific performance
acceptance of a breach
no legal action taken
In a _________ _________ breach, the wrong party 1. discloses the wrong and 2. restores everything of value to the offending party.
unilateral rescission
A __________ __________ __________ sets, in ADVANCE, a specified amount of money as compensation if there is a breach.
Liquidated damages agreement
The currently award for liquidated damages on a purchase agreement form is a maximum of __% (by law) of the home purchased price.
3%
_______ ________ means that the party causing the breach is, through court action, forced to perform the terms of the contract.
Specific performance
A promissory note secured by a deed of trust, a postdated check, or an unsecured promissory note could deb used by a buyer as an earnest money deposit in _______ real property.
Purchasing
The ______ _________ is the most important contract in the real estate field!
purchase agreement; previously known as the deposit receipt; full name: California Residential Purchase Agreement and Joint Escrow Instructions
What does the purchase agreement include?
- percentage of commission
- can fill it in with pen or just type it
- has three copies (aster, buyer’s and seller’s)
What happens when the liquidated damages clause is initialed by both the buyer and the seller, and the buyer defaults? It’s a CAR Purchase Agreement form.
- seller may retain the deposit (up to three percent of the sale price)
- split 50/50 between seller and broker.
If a seller rescinds a contract because a buyer defaults, the earnest money deposit must be returned to the buyer if the parties DID/DID NOT initial the liquidated damages clause in the purchase contract.
DID NOT
Convents are ______.
promises between the parties to a contract.
The _______ ________ _________ form is used as an addendum to either the Residential Purchase Agreement, another offer form, or the counter offer form.
Purchase Agreement Addendum
What is errors and omissions insurance for?
It’s the liability insurance (usually paid for by the salesperson at close of escrow) that brokers and salespeople should carry in order to pay for any costly lawsuits.
In a counter offer, the offer becomes the ________.
Offeror
If an agent fails to disclose known defects in a property to the buyer, the buyer can file civil action against the agent within _____ years.
2 years
The _____ is primarily responsible for disclosing the presence of Mello-Roos tax liens or other assessments.
seller
Which six zones does the Natural Hazard Disclosure Statement cover?
- Seismic
- Earthquake Fault
- Wildland Fire
- State Responsibility
- Flood
- Damn Inundation
In addition to disclosing any known environmental hazards on the TDS, the seller and his/her agent should provide the buyer with the pamphlet entitled “_________ ________: _ ____ ___ _________, _______, ______, and _____,” which includes sections on asbestos, lead, mold, formaldehyde, and radon. The Environmental Hazards Guide does NOT include fire, flood, or earthquake information.
Environmental Hazards: a Guide for Homeowners, Buyers, Landlords, and Tenants
Supplemental Statutory and Contractual Disclosures are usually used for things not provided for in the Real Estate Transfer Disclosure Statement, such as ….
insurance claims affecting the property
An ______ is a right to purchase a property upon specified terms within a specified time period, which is granted in exchange for money.
Option
Optioner: seller
Optionee: potential buyer; who can transfer his share
