Contract Laws and Characteristics Flashcards
A competent party is one that is:
At least 18 years of age
Mentally competent
Cannot be temporary incompetent
All of the above
All of the above
The Texas Real Estate Commission regulates a licensee in which of the following situations?
When the licensee is purchasing a house
When the licensee is purchasing a commercial building
When the licensee is selling a house for a client
At all times
When the licensee is selling a house for a client
What is a legal agreement between parties to do (performance) or not to do (forbearance) a certain act for consideration?
A contract
An offer
Unilateral agreement
Contingency agreement
A Contract
All of the following are necessary to create a valid contract except which one?
Agreement
Earnest money
Competent parties
Legal objective
Earnest Money
What law requires all contracts for real property to be in writing to be enforceable?
Statute of Frauds
Contract law
Real Estate License Act
Real Property Enforcement Act
Statute of Frauds
Which of the following would be an example of “good consideration”?
Cash
Trade a house for a house
Love of a friend
A boat
Love of a friend
What is duress?
Undue influence
Threat of violence
Use of force
Intentional misrepresentation
Use of force
What is it called when a person listens to both sides of the situation and makes a decision. His or her decision is binding and court action cannot be pursued.
Mediation
Arbitration
Litigation
Discrimination
Arbitration
What is defined as agreement to all the terms by all the parties of the contract?
Mutual assent
Consideration
Rule 1 – Statute of Frauds
Counter offer
Mutual assent
When all promises in a contract have been met, that contract is called what?
Executory
Voidable
Executed
Unenforceable
Executed
What is a contract called where there are still promises that need to be fulfilled?
Executory
Voidable
Executed
Unenforceable
Executory
When a written agreement is legal and every item is completely agreed to, it is said to be which of the following?
Valid
Void
Unenforceable
Voidable
Valid
When an essential element is missing in an agreement and the courts would not hold it as a contract, then the agreement would be:
Valid
Void
Unenforceable
Voidable
Void
When one party could change their mind and exit a contract, it is said to be:
Valid
Void
Unenforceable
Voidable
Voidable
When one party may be in default but because of the nature of the agreement, the damaged party would not have the ability to sue the other party in court, this is what type of contract?
Valid
Void
Unenforceable
Voidable
Unenforceable
Which of the following is true?
All contracts must be in writing to be enforceable.
All contracts must be in writing to be valid.
All contracts for the sale of real estate must be in writing to be enforceable.
All contracts are valid and enforceable whether in writing or oral.
All contracts for the sale of real estate must be in writing to be enforceable.
What was the Texas Real Estate License Act called in 1939?
The Real Estate Dealer’s License Act
The Broker’s Act of 1939
The Real Estate Settlement Procedures Act
The Real Estate Investment Act
The Real Estate Dealer’s License Act
What is the legal age in Texas to enter into a valid, binding contract?
17
18
21
Any age
18
Prior to 1939, there was limited regulation for real estate agents. This period ended when the legislature passed
the Real Estate Dealer’s License Act (REDLA), which required real estate agents to obtain licenses
In 1949, Texas Real Estate Commission assumed the administrative responsibilities with the Texas Real Estate License Act. This act allows for real estate licensees to
fill in the blanks of contracts between buyers and sellers for a fee. It also regulates a licensee when he or she is selling a house for a client.
Contracts are voluntary agreements between legally competent parties to perform. Elements of a contract include:
Agreements
Consideration
Competent parties
Legal Objetive
Should a contract fail any of these elements the contract becomes unenforceable or void. Changes in law can also result in void contracts. A contract can become voidable by mistake or error, however failure to read the contract does not make it voidable.
Agreement
ALL terms must be agreed upon by ALL parties of a contract. If one term cannot be agreed to than the entire offer never becomes a contract. Terms must be agreed upon voluntarily and freely. Fraud, misrepresentation, duress, menace, and undue influence are all grounds to void a contract.
Consideration
Something must be exchanged for something else. This is normally in form of Value Consideration (money, other properties, vehicles, etc.) but it could be in the form of Good Consideration or love and affection. Good Consideration typically occurs in the form of one party giving a gift to another. In Texas, a promise to deliver an item is as good as the actual item.
Competent Parties
Both the buyer and the seller must be of legal age and in complete control of their faculties. Being under the age of 18, insanity, the influence of drugs/alcohol, and a lack of mental development are all negating factors for competency.
Legal Objective
The document drafted must not have a purpose that is illegal or against public policy.
Voided contracts are not the same as unenforceable contracts which are contracts that
courts will not enforce, however if the parties perform to all of the terms of the agreement, it will be valid.
Express contracts
are those that have been written down and are clear and definitive
Implied contracts
are those that have NOT been written down and are NOT clear and definitive
All contracts for the purchase of real estate—including mortgages and rental leases longer than one-year—must be
in writing to be enforceable under the Texas Statue of Frauds.
Novation
when the buyer and seller, after drafting an existing contract, end up making alterations to the deal that are so extensive that a new document is drafted. The parties remain the same, but the agreement is now different.
Should one party fail to live up to the contract several option are available to rectify the situation, including
Open discussion
Mediation
Arbitration
Litigation
Open discussion
where the parties meet with the broker to discuss the situation
Mediation
a non-binding discussion carried out by an impartial third party
Arbitration
where a third party issues a binding ruling that prevents any further legal action
Litigation
where the parties take their grievances to court.
The Texas Recording Acts
require that any claim, interest, or ownership in real estate be placed in the public records in the county where the property is located. Parties interested in purchasing, leasing, or providing a mortgage on that real estate will be aware of any other claims.
Contracts that have been signed and followed are said to be
executed contracts
partially completed contracts are known as
executory contracts
Unilateral Contracts
agreements where one party is beholden to perform certain acts for the other. In unilateral contracts one side has all of the rights while the other has all of the obligations
Bilateral contracts
agreements where both sides must perform certain obligations and both sides have rights—most real estate contracts are bilateral.
Without an expressed date in a contract, agreements must be carried out within
“a reasonable time.” Reasonable time is the amount of time which is fairly necessary convenient to do what the contract requires to be done, as soon as circumstances permit.
Time is of the essence contracts
means that there is a finite timeframe for a contract to be executed. Failure to deliver in these circumstances constitutes breach of contract.
Sellers must submit disclosures to buyers, giving them information about a property concerning things like
asbestos, carbon monoxide, lead-based paint, mold, any endangered species of plants or animals, among others.
To close a contract buyers and sellers must
exchange all pertinent documents, including title, to make good on the deal.
