Chapter 9 Flashcards
A __________ is an agreement between two or more parties who, in a “meeting of the minds,” have pledged to perform or refrain from performing some act.
Contract
An _________________ is one in which all the terms and covenants of the agreement have been clearly stated and agreed to by all parties, whether verbally or in writing.
Express contract
6 elements of an express contract:
1) Competent Parties
2) Consideration
3) Mutual Agreement
4) Lawful Objective
5) In Writing and Signed by the Parties
6) Contain a Legal Description
An ______________ is an unstated or unintentional agreement that may be considered to exist when the actions of any of the parties suggest the existence of an agreement.
Implied contract
To establish the existence of an implied contract, it is necessary to show:
1) an unambiguous offer
2) unambiguous acceptance
3) mutual intent to be bound
4) consideration.
A _________________ is one in which both parties promise to perform their respective parts of an agreement in exchange for performance by the other party.
Bilateral contract
In a _________________, only one party promises to do something, provided the other party does something. The latter party is not obligated to perform any act, but the promising party must fulfill the promise if the other party chooses to perform.
Unilateral contract
In a ___________________, there is only one promise, and it is contained in the offer. The offer is accepted by performance of whatever is called for in the offer.
Unilateral contract
An ________________ is one that has been fully performed and fulfilled: neither party bears any further obligation.
Executed contract
An _______________ is one in which performance is yet to be completed.
Executory contract
In a unilateral contract, there is only one promise. Where is this promise?
It is contained in the offer. The offer is accepted by performance of whatever is called for in the offer.
In terms of validity and enforceability, a court may construe the legal status of a contract in one of four ways:
1) Valid
2) Valid but unenforceable
3) Void
4) Voidable
A ________ contract is one which meets the legal requirements for validity.
Valid
A ______ contract is an agreement that does not meet the tests for validity, and therefore is no contract at all. If a contract is void, neither party can enforce it.
Void
A _____________ contract is one which initially appears to be valid, but is subject to cancellation by a party to the contract who is believed to have acted under some kind of disability.
Voidable
State laws declare that some contracts are enforceable only if they are in writing. These laws apply in particular to the transfer of interests in real estate. What type of contract does this describe?
Valid but unenforceable
A _____________ has the legal capacity to enter into a contract and may be held to the promises made in the agreement. An _________________ may not be held to the terms of the contract.
Competent party, incompetent party
The parties to a contract must have the capacity to contract, and there must be at least two such parties. Capacity to contract is determined by three factors:
1) Legal age
2) Mental competency
3) Legitimate authority
_____________ is the exchange of promises offered by one party to another to do or not do something. It separates contractual obligations from a gift. It is usually something of value being exchanged by one party to receive something of value from the other party.
Consideration
_____________ shows the serious intent of the buyer and may serve as liquidated damages in the event of breach of contract.
Earnest money
_________________ are funds paid by the defaulting party to the non-defaulting party according to the terms of the contract.
Liquidated damages
One type of contract that requires a purchaser to pay money to bind the contract is the ________________. A thing of value, usually money, must be given in exchange for the promise of the property owner.
Option contract
The full consent of all parties to a contract is ______________________.
Mutual agreement or mutual assent
When the parties mutually agree to voluntarily cancel a contract it is _________________.
Mutual rescission
Contracts are not valid that require performance that is ___________.
Contracts must state a lawful objective or they are void.
Unlawful
The _______________ in Texas requires that all contracts affecting title to or interest in real estate be in writing and signed by the parties. An oral agreement of sale is unenforceable.
Statute of Frauds
There is one exception to the Statute of Frauds requirement that all real estate contracts must be in writing and signed by all parties.
Leases for one year or less may be oral and are enforceable.
What element required for a valid contract is unique to real estate?
Legal description
A real estate contract that transfers property or any interest in property must include a ___________________.
Legal description
The two commonly used types of legal description are:
1) Metes and bounds
2) Reference to a platted subdivision (lot, block, section, and subdivision name)
A _______ is a negligent or wrongful act concerning a breach of duty rising out of law. It is an act that damages another person and may bring about legal action.
Tort
Discharge, cancellation, or termination of a contract may occur for the following reasons:
1) performance
2) infeasibility
3) mutual agreement
4) operation of law
5) assignment of a contract
_______________ is when a contract terminates when fully performed by the parties.
Performance
When the defendant has failed to complete performance of an agreement according to its terms, the plaintiff may recover such damages as will compensate him or her to the same extent as though the contract had been completely performed. This is referred to as ____________________.
Partial performance
________________ is when a court determines a party has sufficiently performed the contract, even though not to the full extent of every provision.
Sufficient performance
If the performance tendered is either of no value or unsuitable for the purpose that the contract contemplated, the proper measure of damages is the sum that is necessary to repair the defect. This is called ________________.
Defective performance
An otherwise valid contract can be canceled if it is not possible to perform. This is called _____________.
Infeasibility
There are two types of infeasibility of performance that discharge the duty of performance under a contract.
1) subjective infeasibility (ex. Illness or death)
2) objective infeasibility (no one can render the performance)
___________ is when parties wish to create a new contract to replace the cancelled contract. They must comply with the validity requirements for the new contract.
Novation
Discharging a contract by mutual agreement is called _________.
Rescission
When a person _______________, the person’s obligations under existing contracts is terminated as of the filing date.
Files for bankruptcy
The _______________ restricts the time period for which an injured party in a contract has the right to bring a lawsuit against the other party.
Statute of Limitations
A _______________ is a failure to perform according to the terms of the agreement. Also called default, it gives the damaged party the right to take legal action.
Breach of contract
In Texas, the statute of limitations to sue for breach of contract in real estate is years from the time the breach occurred.
Four
In a breach of contract suit, the damaged party may elect the following legal remedies:
1) Rescission (cancels contract)
2) Forfeiture (ex. Buyer who defaults on sales contract may have to forfeit the earnest money deposit)
3) Suit for damages (in civil court within time specified in Statute of Limitations)
4) Suit for specific performance (an attempt to force the defaulting party to comply)
When a contract states the total amount due to a damaged party in the event of a breach, the compensation is known as _______________.
Liquidated damages
When a contract does NOT state the total amount due to a damaged party in the event of a breach, the compensation is known as ________________.
Compensatory damages
Sometimes a contract does not accurately reflect the intentions of the parties because of some mechanical or clerical error in the document. When this happens a legal action called a _____________ is necessary to correct or modify the contract.
Reformation
The standard measure of _____________________, for a total breach, would encompass the difference between the agreed contract price and the market value of the property on the date of breach.
Loss of bargain damages
There are two categories of special damages which a non-breaching party could recover. Both of these damages MUST satisfy a foreseeability test.
1) expenses reliant on the contract (expenses a non-breaching party incurred in reliant on the contract)
2) loss of profit
Objective infeasibility
Means that no one can render the performance
