Contracts

Question 1

Contract

Answer 1

An agreement between two or more parties who, in a “meeting of the minds,” have pledged to perform or refrain from performing some act.

Question 2

Valid Contract

Answer 2

A contract which meets the legal requirements for validity

Question 3

Void Contract

Answer 3

An agreement that does not meet the tests for validity

Question 4

Voidable

Answer 4

A contract 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

Question 5

Express Contract

Answer 5

One in which all terms of the agreement have been clearly stated and agreed to by all parties, whether verbally or in writing

Question 6

Implied Contract

Answer 6

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.

Question 7

Bilateral Contract

Answer 7

One in which both parties promise to perform their respective parts of an agreement in exchange for performance by the other party

Question 8

Unilateral Contract

Answer 8

A contract in which only one party promises to do something if the other party does something

Question 9

Executed Contract

Answer 9

One that has been fully performed and fulfilled (signed by all parties)

Question 10

Executory Contract

Answer 10

One in which performance has yet to be completed

Question 11

Statute of Frauds

Answer 11

requires that certain contracts must be in writing to be enforceable

Question 12

Infeasibility

Answer 12

when a valid contract can be canceled if it is not possible to perform

Question 13

Statute of Limitations

Answer 13

restricts the time period for bringing a lawsuit against the other party

Question 14

Liquidated Damages

Answer 14

compensation due to a damaged party in the event of a breach in contract

Question 15

Listing Agreement

Answer 15

A contract between a seller and a broker

Question 16

Buyer Representation Agreement

Answer 16

An agreement btwn a prospective buyer and an agent

Question 17

Sales Contracts

Answer 17

a legal contract for the purchase of property

Question 18

What does ‘Parties, Consideration, and Property’ mean in regard to real estate?

Answer 18

acquiring property in return for a purchase price

*Essentially paying the seller in exchange for ownership of the property

Question 19

What does the seller typically pay in Closing Costs?

Answer 19

title insurance and property-related costs

Question 20

What does the buyer typically pay for in Closing Costs?

Answer 20

financing-related costs

Question 21

Define ‘Merger of Agreements’ in real estate:

Answer 21

when both parties state that there are no other agreements between them aside from those expressed in the contract

Question 22

what is ‘Time is of the Essence’ in a contract:

Answer 22

that dates and deadlines can be amended only if both parties give written approval

Question 23

What is “Contract for Deed” also known as?

Answer 23

A Land contract

Question 24

Contract for Deed

Answer 24

a bilateral agreement wherein a buyer will acquire possession of the land immediately and pay the purchase price in installments over a period of time and the seller will retain legal title until all payments are made.

Question 25

Lease

Answer 25

A contract by which one party conveys property to another for a specified time

Question 26

An option-to-buy is an example of what type of contract?

Answer 26

Unilateral contract

Question 27

What is a contingency?

Answer 27

A contingency is a condition that must be met before the contract is enforceable

Question 28

What is the most common contingency?

Answer 28

Financing

Question 29

What does the escrow clause in a sales contract do?

Answer 29

releases the escrow agent from certain liabilities regarding the custody and disbursement of Earnest Money

Question 30

In what paragraph would you find the buyer’s right to an inspection?

Answer 30

Property condition

Question 31

What is the term in the sales contract that allows division of some expenses between buyer and seller?

Answer 31

Prorations

Question 32

In a contract for deed situation, what must a person do to convert his/her interest in the property into a legal title?

Answer 32

• Pay seller full amount due on the contract for deed
  or
• Deliver a promissory note equal to the balance due that contains the same due date, interest rate, and late fees as the contract

Question 33

What two primary purposes does a contract for deed serve for a seller?

Answer 33

• facilitates a sale that might otherwise be impossible
• may give the seller certain tax benefits

Question 34

If the seller fails to deliver the deed at closing, the seller would be what?

Answer 34

In Default