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NJ Real Estate Exam > Chapter Nine - Contracts > Flashcards

Chapter Nine - Contracts Flashcards

1
Q

CONTRACTS

Contract

A
  • Contract: voluntary agreement between two or more legally competent parties supported by consideration wherein the parties agree to do or refrain from some legal act.
  • Governed by the Statute of Frauds.
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2
Q

Oral Agreements

A
  • Oral agreements for the sale of reala estate and oral leases for longer than three years are enforceable provided that the party seeking damages can prove the contract by “clear and convincing” evidence.
  • A real estate broker’s authorization must be in writting and signed.
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3
Q

TYPES OF CONTRACTS

A
  • Unilateral or bilateral.
  • Valid, void or voidable.
  • Enforceable or unenforceable
  • Executed or executory
  • Express or implied.
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4
Q

Unilateral Contract

A
  • An option is an example.
  • One party
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5
Q

Bilateral Contract

A
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6
Q

Valid Contract

A
  • A contract that satisfies all the legal requirements of a contrcat.
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7
Q

Void Contract

A
  • A contract that has no legal effect and is not a contract at all.
  • Missing 1 or more of the essential elements required by law or written for an illegal purpose.
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8
Q

Voidable Contract

A
  • A contract that can be enforced or rejected and, at the same time, is unenforceable against that same party,
  • Examples are minors who sign contracts with non-minors.
  • Can be made void.
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9
Q

Unenforeable Contract

A
  • A valid contract that cannot be enforced.
  • Examples include statute of limitations, oral contracts that are required to be in writing, and contracts with terms that are considered unconscionable.
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10
Q

Executed and Executory Contracts

A
  • Executed Contracts: Refers to a contract where both parties have performed all that is required of them by the contract.
  • When a deed is deliverd in exchange for the purchase price, the parties have performed under the contract of sale and the contract is said to be “executed”
  • Executory Contracts: A contract under which one or more parties has not yet performed.
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11
Q

Express or Implied Contracts

A
  • Express Contracts:
  • Implied Contracts: When agreement is based upon acts and/or conduct rather than by words.
  • Ordering a meal —> food for payment.
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12
Q

ESSENTIAL ELEMENTS OF A CONTRACT

A
  • Offer and acceptance
  • Consideration
  • Competent parties
  • Reality of consent
  • Legal purposes
  • Description of property
  • Singature of the party to be charged
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13
Q

Offer and Acceptance

A
  • An offer is deemed accepted whent he acceptance has been communicated back to the offeror.
  • A counteroffer is considered a rejection of the original offer.
  • An offer is terminated by the death of either party.
  • An offer can be withdrawn at any time prior to acceptance.
  • A rejected off is a dead offer.
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14
Q

Consideration

A
  • Each party must exchange something of value.
  • Earnest money is NOT essential to a valid contract.
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15
Q

Competent Parties

A
  • All parties to a valid contract must have legal capacity in order for the contract to be binding.
  • Contracts are voidable by the incompetent party but not by the other party.
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16
Q

Reality of Consent / Mutual Consent

Meeting of the Minds

A
  • The parties must enter into an agreement knowingly and voluntarily and must mutually consent to be bound by its terms.
  • This mutual consent is referred to as a Meeting of the Minds.
17
Q

Unilateral Mistakes

A
  • A Unilateral Mistake may be voidable by the injured party.
  • Stupidity or ignorance of the law is no excuse or grounds for rescission.
18
Q

Bilateral Mistakes

A
  • If there is a mutual mistake, a meeting of the minds never took place and the contract would be void.
19
Q

Misrepresentation

A
  • A contract is voidable whenever the is material misrepresentation.
20
Q

Fraud

A
21
Q

Undue Influence

A
  • Contract becomes VOIDABLE
22
Q

Duress

A
  • Voidable
23
Q

Signatures

A
  • The Statute of Frauds does not require the contract to be singed by all parties.
  • It needs to be signed only by the party being charged - sued.
  • The signature of the party seekign enforcement is not required.
24
Q

ASSIGNMENT OF CONTRACT

A
  • Contracts are assignable unless their terms specifically forbid it or unless its a personal service agreement.
25
Q

OPTIONS

A
  • Option: A written contract supported by consideration under which a prospective purchaser (optionee) is given the right to purchase the property, for a stated price and terms, within a fixed period of time, but without imposing any obligation to purchase.
26
Q

STATUTE OF LIMITATIONS

A
  • Six years.
27
Q

CASH TRANSACTIONS

A
  • Must be reported to the IRS must be made within 15 days or receipt of cash and records retained for 5 years,
28
Q

THE REAL ESTATE SALES CONTRACT

A
  • Parties to a contract are called the vendor (seller) and the vendee (purchaser).
  • Equitable Title: the law recognizes some ownership rights of the purchaser even though he is not yet the owner of record.
  • Seller is responsible for the risk of loss or damage until the closing.
29
Q

EARNEST MONEY

A
  • Its frequently called a binder.
30
Q

BREACH OF CONTRACT

Breach by Seller (Buyer Remedies)

A
  • Rescission of Contract: The minimal remedy available to the purchaser if the seller defaults is to rescind the contract and recover the deposit under the contract.
  • Purchaser is entitled to be reimbursed for reasonable expenses of the title search.
  • Sue for Compensatory Damages: The loss of bargain damages consist of the difference between the contract price and the market price at the time of the seller breach.
  • Compensatory damages may also include the additional cost of acquiring a substantially equivalent property.
  • Specific Performance: The most common reason courts grant specific performance is that the subject property is unique.
31
Q

Breach by Buyer (Seller Remedies)

A
  • Rescission of Contract: Rescind the contract and recover the deposit paid under the contract.
  • Sue for Compensatory Damages: The damages consist of the difference between the contract price and the market price and may also include cost of acquiring an equivalent property.
  • Specific Performance:
32
Q

Breach by Buyers (Seller’s Remedies)

A
  • Forfeiture of Deposit: Only permissable when a contract contains a liquidated damages clause.
  • Absent liquidated damages clause, seller is entitled only to the actual damages suffered.
  • Liquidated Damages: legally recoverable amount, AGREED upon that one party agrees to pay the other in the event of a breach of contract.
  • Courts will not enforce penalty provisions as a remedy of breach of contract.
  • Sue for Compensatory Damages: Seller may initiate a suit for actual damages sustained as a result of a breach - less a credit for any deposit.
  • Specific Performance.
33
Q

PREPARATION OF CONTRACTS BY LICENSEES

A
  • Brokers are permitted to fill in the blanks in approved standard contract forms for the following:
  • Contracts for the sale of 1 to 4 family dwellings and vacant 1 family lots involving transactions in which the broker has a commission interest.
  • Leases for residential property with a term of one year or more where broker has a commission interest.
34
Q

Attorney Review

A
  • Counting the Time: 3 business days from the date of delivery of the signed contracts to the buyer and seller.
  • Notice of Disapproval: Attorney must send a notice of disapproval to the brokers prior to expiration of attorney review.
  • The telegram or certified mail will be effective upon sending.
  • Personal delivery will be effective upon delivery.
35
Q

Offers Received During and After Attorney Review

A
  • Written offers are treated as back-up offers after attorney review.
36
Q

NOTICE REGARDING CLOSINGS WITHOUT ATTORNEYS

A
  • Pertains to the conflicting interests of brokers and title companies and a brokers unauthorized practice of law.
  • Notice Requirements: Licensees are required to inform buyers and sellers that they must read the Notice before singing the contract.
  • Title company must confirm that both parties received the Notice prior to closing.
  • Brokers may order title searches and an attorney retained by the broker may prepare conveyance documents upo written request of their client.

NJ Real Estate Exam (8 decks)

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