Chapter 8 Flashcards
Express contract
An express contract occurs when the parties communicate their intentions to each other either in writing or verbally.
Bilateral contract
In a bilateral contract, both parties make promises and therefore incur obligations
Tit for tat
All Essential Elements of a Contract
Competent Parties Mutual Assent Genuine Assent Consideration Lawful Purpose In Writing, As Required By Law
Mutual Assent
A contract must have a meeting of the minds or mutual agreement
Offer and Acceptance
The mutual agreement is reached through the process of offer and acceptance.
When Offers Are Dead…
Ex. Sarah reject the offer. There is NO contract.
Ex. Ben withdraws the offer before Sarah has had time to act. There is NO contract.
Negative Fraud
The definition of fraud includes concealment of important information. This is called NEGATIVE fraud. For example, a broker showing a listing to a prospective buyer knows that the air conditioning system is inadequate to cool the house but fails to mention that fact.
Negative Fraud Example
Broker Jefferson told prospective buyer Scott that the land he was considering had been approved for the use of septic tanks, knowing that in fact it would not pass percolation tests. If Scott relied on this information and bought the land, the contract might later be rescinded.
Real Estate Form Use
However, in real estate, the importance of the promises that are being made obligates licensees to make absolutely sure that contracts are complete, unambiguous, and that they express the intent of the parties.
Earnest Money
Most real estate sales contracts provide that the seller, in the event the buyer defaults, has the option of retaining the buyers earnest money deposit as liquidated damages, as long as the amount of the deposit is not excessive. Usually, choosing to take the earnest money as liquidated damages prevents the seller from taking any other course of action to obtain damages.
Damages
If the loss suffered can be expressed in terms of money, the innocent party may sue the defaulting party for the money damages caused by the default.
Land Contract
The land contract, also known as purchase money mortgage, also known as installment sale contract, or contract for deed, is an alternative method of financing a home purchase. A land contract would typically be used when sufficient financing is not available to the buyer from a lending institution. It may be used to buy any type of real estate not just land. Seller holds title until the contract has been settled.
