Contract Law 2 Flashcards
statute of frauds
Indicates that every single real estate transaction has to be in writing.
what would prevent a fraud?
Put it in writing; therefore the terms are clear
in communication.
This stops fraud from happening.
power of attorney
Has the authority to act on someone else’s behalf giving the ability to sign or effect
contracts on behalf of someone else.
two different types of
power of attorney
General or Specific
As an agent you do not want the responsibility of holding specific power of attorney for your client as that is a conflict of interest and the liabilities are severe
agent’s role in preparing contracts
agents will fill in forms and eventually those
become a contract
agents do not draft the verbiage of a contract
discharge of contracts
Moving a contract along to fulfillment (to close and get paid), or a termination of the contract by mutual agreement.
mutual enforcement
Contract between two parties and each party has the right and ability to enforce the terms of that contract on the other party.
full performance
Each party committing to fulfill the terms of the contract and those terms coming to fulfillment.
impossibility of performance
Things do happen outside our control (house burning down, one of the parties deceased, a party deemed incapacitated, etc.) that makes the contract unable to be
performed.
example of impossibility of performance
An example is the buyer loses their job, therefore the tone contract become very important to know how to
enforce this for each party and what is the remedy.
operation of law
Within the state of Utah, we are governed by the rules and regulations of the Division of Real Estate as well as
the general laws that apply within a contract govern us. The remedies and rights are spelled out for both the
buyer and seller and can be enforced if needed.
The Statute of Frauds:
A: Spells Out The Definition Of Mortgage Fraud
B: Stipulates That All Real Estate Contracts Must Be In Writing
C: Stipulates That All Leases Over 12 Months Must Be In Writing
D: Both B And C
D: Both B And C
There are two types of power of attorneys
A: General Or Specific
B: Specific And Subject
C: Commitment & Relationship
D: General And Combined
A: General Or Specific
Full performance is:
A: Each Party Committing To Fulfill The Terms Of The Contract And Those Terms Coming To Fulfillment
B: Not Fulfilling The Contract And Negotiating The Terms
C: Inability To Fulfill The Contract
D: Ability To Fulfill Some Parts Of The Contract
A: Each Party Committing To Fulfill The Terms Of The Contract And Those Terms Coming To Fulfillment
Mutual Enforcement is
A: Two Parties And Each Party Has The Right And Ability To Enforce The Terms Of That Contract On The Other Party
B: When All Parties Agree To The Contract That Was Established
C: The Ability To Communicate In All Aspects
D: Agreeing To The Terms Of Conditions Of The Contract
A: Two Parties And Each Party Has The Right And Ability To Enforce The Terms Of That Contract On The Other Party
early termination of contract
Sometimes is it mutually agreed upon and sometimes not. There is no cancellation provision in the Buyer Broker Agency Agreement of the Exclusive Right to Sell, therefore the only way to terminate a contract early is to come before the other party and try to come to agreement on terms and conditions in order to terminate the contract.
buyer broker agency agreement and the exclusive right to sell
Two very important contracts in real estate. These contracts are not with you as the sales agent, it is with the broker.
importance of completing contract as agreed
The beginning of every contract states that it is legally and binding. Each party is legally expected to complete the terms as stated in the contract in order to bring the contract to completion. A big part of the agent’s job is to make sure the terms of the contract are being followed and fulfilled.
example of importance of completing contract
as agreed
I’m selling my home because I am buying the home as stated in the contract. If you change the contract or don’t fulfill the contract then that forces me to look for remedies within the contract or to take legal action because I have been damaged or feel that I have been.
breach of contract
One of the parties does not fulfill a term of the contract. Failure to execute the agreed upon terms.
EX: One of the parties did not deliver documents within a timeframe as specified within the contract. One did not communicate or give full disclosure about something.
consequences of a breach of contract
Monetary Damages
Specific Performance
Rescission
Liquidated Damages
specific performance
For one party to sue another party in order to have the court to enforce the contract. (To make them do what they say they will do.)
rescission
Putting things back the way they were. Restore to the way things were before we entered into a contract.
ways to terminate a contract
Performance
Assignment
Novation
Impossibility of Performance
Anticipatory Repudiation
assignment of a contract
Wanting someone else to take over your part of the contract. Current real estate contract has provision that says contract is not assignable. General contract law
states that contract are assignable.
EX:I have a contract to purchase a property and I decide to I want someone else to take over my contract I can assign over that interest/right and have you become the new party. I would have to get approval from the seller before it becomes a Qualified assignment
simple assignment
to have the new party step of front of you in the contract to take it over, but you don’t go away. if the new party defaults or can’t fulfill the contract then I am still responsible
novation
A replacement with a release. One party is taking the place of another and the original party is being released from the contract.
impossibility of performance
The parties want to perform, but due to
unforeseen circumstances, cannot.
anticipatory repudiation
One of the parties gives some indication, either by words or action that they do not plan on moving forward with the contract. Leads to one party potentially in breach of contract and the other party is in compliance. If they do not follow through as stated in the contract, remedies will be pursued.
Agent’s job
Agent’s job for the party stating that they were not going to conform is to help them understand what the implications might be so they can come to reason with them. As an agent, explain the legal ramifications without going too deeply in order to not overstep the bounds of your licensure, then direct them back to the default section of the contract. Spell out what is there without giving legal interpretation. If you anticipate either party will be in breach of their contract, contact your broker immediately.
example of anticipatory repudiation
“I am not going to sign that,” “I am not repairing that” etc. when it was agreed to in the contract.
Sam Smith can withdraw his offer to purchase the office building:
A: Any Time Prior To Acceptance
B: Any Time Until The Seller Receives The Offer
C: Any Time Before The Contract Is Fully Executed
D: After The Response Time On The Contract Has Expired
A: Any Time Prior To Acceptance
Failing to perform the duties owed by contract is called:
A: Breach Of Contract
B: Specific Performance
C: Injunction
D: Liquidated Damages
A: Breach Of Contract
The Smiths and the Johnsons have agreed to cancel out the old contract and substitute it for a new one. This substitution process is called:
A: Recission
B: Novation
C: Waiver
D: Assignment
B: Novation
Novation is:
A: When Party Makes An Agreement With Another Party
B: A Replacement With A Release One Party Is Taking The Place Of Another And The Original Party Is Being Released From The Contract
C: The Agent Will Communicate For Both Parties
D: The Ability For The Agent To Represent Their Client
B: A Replacement With A Release One Party Is Taking The Place Of Another And The Original Party Is Being Released From The Contract
important clauses in a contract
- “As Is” Clause
- Contingency Clause
contingency
Subject to. The buyer wants to buy the seller’s house contingent that certain things must happen
EX:
The appraisal will come in at least at purchase price and that the buyer will be able to obtain financing for the
property. Due diligence is important. Disclose everything upfront After all the inspections that I still want to buy it because you have already disclosed to me.
“as is” clause
Property is going to stay in the condition that it is in. The seller will make no further improvement to the property.
contingency clauses
Most common contingency in real estate is financing. Some contingencies are so frequent there are pre-written addendums such as: those subject to the sale of the house and Notice of Interest (being related to someone within the transaction).
abrogation
A replacement of the Real Estate Purchase Agreement by the lender and the title company’s closing documents. The closing documents will be the final documents and they abrogate, or replace, the previous documents.
time is of the essence
Dates are firm. Honor the dates and deadlines
as set forth within the contract.
blanks
A good agent never leaves any blanks in the
Real Estate Purchase Contract.
white out
Do not use white out. Do not strike through and initial, it is a violation of state law. If any changes need to be made, the place to do that is in the Addendum.
abbreviations
An abbreviation used by one person might not be understood by another. Within a contract always write things out and avoid using abbreviations. Communicate clearly and concisely.
role of a notary
public To verify that the signature that’s there was put there, in fact, by that person. Many of the real estate contracts do not need to be notarized, however, the closing documents are notarized.
four contracts of real
estate
- Buyer Broker Agency Agreement
- The Exclusive Right to Sell
- Real Estate Purchase Contract
- Multiple Listing Service
A good agent never leaves any ______ in the real estate purchase contract
A: Typos
B: Blanks
C: Spaces
D: Mistakes
B: Blanks
In a contract, always write things out, never use abbreviations
A: True
B: False
C: Depending On The Contract
D: Only Applies To Certain Contracts
A: True
Always type as often as possible into the contract, so its legible
A: True
B: False
C: Depends On The Requirements For The Contract
D: Only Applies To Certain Contracts
A: True
Which of the following are valid contracts of real estate?
A: Buyer Broker Agency Agreement
B: Real Estate Purchase Contract
C: Mutual Agreement Contract
D: Both A & B
D: Both A & B
buyer broker agency agreement
Creates agency between the buyer and the
brokerage.
exclusive right to sell
The contract that creates agency with the seller. This contract allows the agent to market that property, to have a key to the property, to put the property on MLS, to negotiate on behalf of the seller and execute all of fiduciary duties.
real estate purchase contract
The contract between the buyer and seller.
The agent will not sign this contract.
multiple listing
service A contract between brokers and the agreement to compensate in the event another broker brings a buyer.
If fraud is committed as to the nature of the contract, the contract is:
A: Void
B: Voidable
C: Unenforceable
D: Valid
A: Void
Annulment of an existing contract is called:
A: Novation
B: Recission
C: Waiver
D: Assignment
B: Recission
The four types of contracts in real estate include:
A: The Buyer Broker Agency Agreement
B: The Real Estate Purchase Contract
C: The Exclusive Right To Sell
D: All Of The Above
D: All Of The Above
A contract can be terminated because of:
A: Full Performance
B: Mutual Release
C: Novation
D: All Of The Above
D: All Of The Above
Jim Jones is under contract to purchase a new home. Three days before Settlement, his home burns to the ground. The contract between Jim and his builder is cancelled because of:
A: Novation
B: Anticipatory Repudiation
C: Impossibility Of Performance
D: Mutual Release
C: Impossibility Of Performance
Essential elements of a contract include:
A: Consideration
B: Capacity
C: Legal Purpose
D: All Of The Above
D: All Of The Above
The Smiths have breached their contract with the McClellans. The McClellans sue the Smiths. The court orders the Smiths to complete the contract as agreed. This is called:
A: Specific Performance
B: Liquidated Damages
C: Mediation
D: Recission
A: Specific Performance
The “Time is of the Essence” clause in a contract means:
A: All Dates In The Contract Are Firm
B: Failure To Adhere To Contract Deadlines Constitutes A Breach Of Contract
C: Failure To Adhere To Contract Deadlines Renders The Contract Voidable By The Non-Breaching Party
D: All Of The Above
D: All Of The Above
The “As Is” clause in a contract:
A: Means The Buyer Is Accepting The Property In Its Current Condition
B: Does Not Protect The Seller From Failure To Disclose Material Defects In The Property
C: Both A And B
D: Neither A Nor B
C: Both A And B
A filing of public notice that legal action is pending on the property is called:
A: Judgment
B: Lis Pendens
C: Recission
D: Novation
B: Lis Pendens
