Chapter 8 Flashcards
Actual communication
Oral or written communication to the offer or that the offeror has accepted the offer
Actual fraud
A deliberate misrepresentation of a material fact, made with the intent of inducing the other party to act upon it to one’s detriment. Can be done by words or silence.
Addendum
A page added to a form contract for the purpose of including essential terms or to provide supporting documentation, such as plats or power of attorney. The addendum should be incorporated into the contract by reference then initialed and dated by the parties. Also called an exhibit.
Affiliation agreement
The contract a licensee signs when joining a broker or brokerage firm
Arbitration
The process of settling disputes where by the disagreeing parties submit the differences to a neutral third-party and agree to be bound by his or her judgment
Assignee
The person to whom a right or legal interest is transferred; one to whom an assignment is made
Assignment
A legal transfer of one’s rights and obligations under a contract to a third-party
Assignor
One who transfers a right or legal interest to another
Bilateral contract
A contract in which the parties mutually exchange promises, binding both to perform
Breach of contract
Failure without legal excuse to preferment one’s obligations under contract. Failure to fulfill a duty
Commingling
Mixing funds held in trust with the Brokers personal or business accounts
Consideration
Anything a monetary value to induce another to enter into a contract
Constructive communication
Communication by operator of law. When an offer is made through a courier such as the mail, the offerree’s acceptance is effectively communicated to the offeror when acceptances is sent, not when it is received by the offerer, not when it is received by the offeror.
Constructive fraud
The misrepresentation of material facts, without intending to deceive or mislead but involving a breach of duty, such as negligence or carelessnessness. For example, a broker is negligent in the duties to discover the truth about zoning and unintentionally misleads a prospective purchaser.
Contract
An agreement to do or not to do a particular act or thing which is enforceable by law. For the agreement to be valid and enforceable and must contain the following elements: legally competent parties, mutual assent, genuine assent, consideration, lawful purpose, and be in writing when required by law.
Contract for deed
Also called land contract
Corporation
A legal entity created under authority of the state. A resolution of the Board of Directors authorizing certain officers to sign a contract. This is required in order to bind a corporation.
Counter offer
A proposal by an offeror to an offeree or made in response to an offer. A counter offer terminates the original offer. Sometimes called qualified acceptance. A proposal made by the receiver of an offer to the one who made the offer.
Damages
Loss or injury to a person or property caused by breach of contract. Also, the compensation paid for such loss.
Default
Breach of contract
Duress
The use of force to compel a person to enter into a contract.
Earnest money
The purchasers initial commitment of something of value to indicate that he or she wants to buy the property according to the terms of the offer being submitted. Earnest money deposit received by the broker must be placed in his or her designated trust account, until the transaction is either closed or otherwise terminated.
Earnest money contract
Also called sales contract
Escrow agreement
A contract between parties to a real estate transaction which provides for the deposit of legal documents in money with a neutral third-party along with instructions for finalizing the transaction. Used only in certain states
Executed contract
A contract in which all parties have fully performed their obligations
Executory contract
A contract not yet fully performed. Something remains to be done by one or both of the parties.
Exhibit
A page added to a form contract for the purpose of including essential terms or to provide supporting documentation, such as plats or power of attorney. The addendum should be incorporated into the contract by reference then initialed and dated by the parties. Also called an addendum
Expressed contract
A contract made orally or in writing
Fraud
Malicious (willful) or negligent misrepresentation of a fact in a transaction on which one or more of the parties to the transaction relies and thereby suffers damages. It creates a voidable contract, possible court damages and possible sanctions for a licensee.
Genuine Assent
An essential element of a contract which requires that all parties enter into the contract under their own free will absent of fraud, misrepresentation, duress, menace, or undue influence.
Good consideration
Something with a monetary value, love and affection
Guardian
I want appointed by the court to take care of and manage property in affairs of another person Judge legally incompetent
Implied contract
A contract in which the promises are not expressed but manifested by the conduct of the parties
Incompetent
A person who lacks the legal capacity to form a contract due to infancy, insanity, intoxication, or other reasons
Infant
Also called minor
Installment land contract
Also called land contract
Land contract
A contract in which the buyer typically makes a small down payment, takes possession, pays the taxes, and makes installment payments of principal and interest to the seller under the purchase price is paid in full. The seller retains a title until the buyer has paid all installments and otherwise performed under the contract.
Legal capacity
Legal ability to enter into a contract
Limited liability company
A unique form of ownership not classified as a corporation, but in association similar to that of a limited partnership. Management responsibilities are vested in his members and members are not personally liable for debts of the limited liability company. Members are not stockholders in therefore, profits are not taxed at the corporate level.
Liquidated damages
A sum of money specified in a contract as compensation to be paid to one of the parties if the other defaults
Listing agreement
A real estate broker‘s contract of employment with an owner. The agreement obligates the owner to pay the broker a commission it’s the broke the finds of ready, willing, enable buyer, but it does not obligate the owner to contract with the buyer.
Marketable title
Title to land which is free from reasonable objections leaving no doubt as to who the owner is. A title which a title insurance company will ensure at its regular rates, subject only to standard exceptions.
Meeting of the Minds
Mutual agreement to the terms and conditions of a contract by all parties involved
Menace
The treat of force to compel someone to enter into a contract against his or her will
Minor
A person under legal age or the age of majority. Depending on the particular state, a minor is one under 18 to 21 years of age. A contract may by a minor is voidable.
Novation
A process of discharging obligations under a contract by substituting a new contract for an existing one or by substituting a new party for an old one.
Mutual assent
An expression of mutual agreement manifested by a conditional acceptance of all terms and conditions of an offer
Mutual mistake
A mistake and assumption made by both parties concerning a material fact of the contract. Results in a void contract.
Mutual Rescission 
Cancellation of a contract made voluntarily by all parties involved
Negative fraud
Deliberate misrepresentation by failing to disclose vital information, such as defects that are not readily apparent from a reasonable inspection. A form of actual fraud.
Negligence
Breach of duty resulting from failure to exercise reasonable care required by the circumstances involved in each individual case
Negligent misrepresentation
A false statement believed to be true but is made without sufficient grounds for such belief due to carelessness or negligence. When relied upon by another party, it has the same effect as willful misrepresentation and results in constructive fraud.
Offer
A proposal to make a contract. It does not become a legal offer until it comes to the knowledge of the person to whom it is made, known as the offeree.
Offer and acceptance
And essential element for the creation of a contract. Also called mutual assent and a meeting of the minds.
Offeree
The party to whom it offer is made
Offeror
The party who makes an offer
Option
A contract which binds one party to hold an offer open to another party for specified period of time
Optionee
The party buyer or tenant to whom an option is granted
Optionor
The party, usually the owner who grants an option to another
Parol evidence rule
Rule of law disallowing oral evidence which disputes a written agreement
Patent defect
One that is readily apparent by ordinary inspection
Puffing
A statement of exaggeration which a reasonable person would recognize as untrue a.k.a. puffery
Reality of consent
Genuine assent
Rescind
To disaffirm or cancel contract. Each party is restored to his or her legal and monetary positions in existence prior to the contract
Right of rescission
The right to cancel contract and restore the parties to their original positions. A return to status quo.
Sales contract
In agreement which binds the buyer and seller of real estate
Specific performance
A legal action to force performance of the precise terms of the contract when one party defaults. This remedy of laws is available to a seller only if a suit for damages is not adequate.
Statute of Frauds
State law which requires that certain contracts must be in writing in order to be enforceable in a court of law
Statute of limitations
State law which limits the amount of time one has to seek a legal remedy when the other party defaults.
Survival clause
A contract provision which allows all or part of the agreement to survive the closing and to remain binding on the parties after the deed has been delivered
Tender
An unconditional offer to perform other the terms of a contract. If the party to whom tender is offered does not perform, the other party usually enters a suit for damages or specific performance and files a legal notice of les pendens.
Time is of the essence
A contract provision which makes it essential that all time limits in the agreement be strictly met
Undue influence
Using a position of trust and confidence to take unfair advantage of another person in order to obtain a contract.
Unenforceable contract
A contract which does not entitle the party to seek legal remedy upon default because it fails to meet some legal requirement, such as the Statue of Frauds or Statue of Limitations
Unilateral contract
A contract involving the promise of only one party in exchange for an act or forbearance of another only the party making the promise is obligated to perform.
Unilateral rescission
When one party to a contract defaults, the injured party notifies the defaulting party that the contract is terminated in offers to return all consideration received. The injured party is then entitled to a return of any consideration paid.
Valid contract
The contract that contains all the essential elements of a contract. To be enforceable it must also be in writing as required by the statue of frauds in each particular state.
Valuable consideration
Money or anything of a monetary value, such as property, service, or a forbearance, when received as a benefit by one party resulting from a detriment suffered by another.
Vendee
A buyer
Void contract
A contract which has no legal effect because one or more essential elements of contract is not present a void contract, under the law, never existed.
Voidable contract
A contract that appears valid and enforceable on its face, but is subject to rescission by the party or parties acting under a disability
Waste
Willful misuse, destruction, or neglect of real estate by a person rightfully in possession that results in a decrease in value of the premises, to the detriment of another person who holds future right of possession.
