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RE Principles > Chapter 6 - Real Estate Contracts: Offer and Acceptance > Flashcards

Chapter 6 - Real Estate Contracts: Offer and Acceptance Flashcards

1
Q

Contract

A

An agreement to do or not to do something.

Legally enforceable agreement between competent parties.

Two common types of contracts –

  1. Listing Agreement
  2. Purchase Agreement
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2
Q

Contract Requirements

A

Four essential elements of any VALID contract–

  1. Competent parties/ Capacity to Contract - parties must not have been declared incompetent
  2. Mutual Assent - the mutuality of the agreement. Genuine offer and genuine acceptance.
  3. Lawful Objective - Purpose of contract must be for LEGAL purpose.
  4. Sufficient Consideration - Consideration is the bargained for exchange that occurs when two people contract to do or not to do something.
  5. In writing - ALL real estate contracts must be in writing (except leases of 1 year or less)
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3
Q

Incompetent

A

One who is mentally incompetent or incapable.

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4
Q

Offeror vs Offeree

A

Offeror - Person making an offer

Offeree - Person receiving an offer

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5
Q

Patently Frivolous Offer

A

An offer that is not to be taken seriously.

Example - an offer of $1 to purchase a $1 million home

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6
Q

Consideration

A

Bargained for exchange used in a contract.

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7
Q

Statute of Frauds

A

Federal law that requires all real estate contracts to be in writing, except leases of 1 year or less.

Also requires all contracts that cannot be performed within 1 year to be in writing.

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8
Q

Types of Contracts

A 
Express / Implied
Bilateral / Unilateral
Executory / Executed
Enforceable / Unenforceable
Valid / Void / Voidable
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9
Q

Express Contract

A

A contract expressed orally or in writing.

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10
Q

Implied Contract

A

A contract that is formed by the actions of the parties.

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11
Q

Bilateral Contract

A

A promise for a promise.

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12
Q

Unilateral Contract

A

A promise for an act.

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13
Q

Executory Contract

A

A contract that is in the process of being performed and has not yet been completed.

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14
Q

Executed Contract

A

A contract that has been completed.

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15
Q

Unenforceable Contract

A

A contract that cannot be enforced.

Example - a verbal contract to buy or sell real estate.

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16
Q

Voidable Contract

A

A contact that is valid until rescinded by one of the parties to the contract. A person under duress could void the contract at their discretion.

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17
Q

Duress

A

Occurs when one party forces the other party through threat of violence to do something against their will or better judgement.

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18
Q

Community Property

A

Real property owned by a husband and wife or two spouses in CA.

19
Q

Void Contract

A

A contract that has no force or effect.

Example - A contract to commit an illegal act

20
Q

Illusory Contract

A

Occurs when one of the parties is not bound by the agreement.

21
Q

Breach of Contract

A

When a party to a contract breaks the contract.

22
Q

Compensatory Damages

A

Actual losses sustained by the plaintiff and are paid by the defendant.

23
Q

Punitive Damages

A

Designed to punish the defendant by taking money away from the defendant and giving it to the plaintiff.

24
Q

Liquidated Damages

A

Damages that are set ahead of time in the event of a breach of contract.

25
Q

Contingency Clause

A

Specific conditions or actions that must occur before the buyer moves forward with the purchase of the property.

26
Q

Physical Inspection Contingency

A

Allows a buyer adequate time to thoroughly inspect a single-family home and have experts inspect it prior to moving forward with the purchase.

27
Q

Active Contingency Removal

A

The buyer signs a contingency removal form that removes a contingency to the contract.

28
Q

Passive Contingency Removal

A

Buyer is not required to sign contingency removal to remove a contingency. As time passes and the buyer does nothing, this removes the contingency.

29
Q

Appraisal Contingency

A

Contingency to the contract that allows the buyer to not remove the contingency if the property does not appraise for the purchase price.

30
Q

Financing Contingency

A

Contingency to the contract that allows the buyer to not remove the contingency if the buyer is not able to obtain financing to purchase the property.

31
Q

Novation

A

A substitution of a new contract for an old one.

Example - Loan assumption to replace one borrower for another

32
Q

Statute of Limitations

A

The length of time a person has to take action in a court of law.

33
Q

Option

A

A person pays consideration to another person for the option of purchasing a property for a specific amount and within a certain length of time.

34
Q

Optionor vs Optionee

A

OPTIONOR (landowner) gives an option to the OPTIONEE (developer).

OPTIONEE can exercise an option to purchase real property.

35
Q

Specific Performance

A

If seller refuses to convey property, buyer can sue seller for specific performance and ask the courts to force the seller to sell the property to the buyer.

36
Q

Civil Courts

A

Courts that decide civil matters such as monetary disputes.

37
Q

Criminal Courts

A

Courts that decide criminal matters such as selling real estate without a real estate license.

38
Q

District Attorney

A

Prosecutes defendants in criminal courts.

39
Q

CA Real Estate Consumer Recovery Account Fund

A

Fund that uses a portion of real estate license fees to pay consumers who have uncollectable judgements against CA real estate licensees.

40
Q

Trust Funds

A

Funds held by a real estate broker on behalf of their clients.

41
Q

Plaintiff vs Defendant

A

Plaintiff - Person bringing a lawsuit in court.

Defendant - Person being sued in court.

42
Q

Mediation

A

A NON-BINDING process outside the courts to decide a dispute.

A mutually agreeable (non-binding) attempt by a third party to resolved a dispute between a buyer and seller.

43
Q

Arbitration

A

A BINDING process outside the courts to decide a dispute.

Arbitration is reached when MEDIATION cannot resolve the dispute.

A private and informal (yet BINDING) means to resolve a dispute.

RE Principles (14 decks)

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