Contracts Flashcards
What are contracts?
Legally binding agreement between 2 or more parties to do or not to do something.
Parties can be legal persons (like an LLC, an individual, etc.)
What is “performance” in terms of contracts?
Doing what you promised under a contract.
What are the essentials of contracts & statuses?
The requirements are:
- Offer and acceptance (meeting of the minds): Buyer puts in an offer and the seller accepts.
- Consideration (exchange of value between parties): buyers gives the money, seller gives the house.
- Legal Object (Needs to be a contract to do something legal): like selling a house.
- Reality of Consent (both parties voluntarily accept) & competence (mental capacity to understand and consent).
If you don’t have one of the first three essentials of a contract, what does the contract become?
Void.
If there is any misrepresentation or fraud in the contract, what does the contract become?
Voidable (up to victim to make it void).
If someone signs a contract under duress or undue influence, what does the contract become?
Voidable (up to victim to make it void).
What is duress?
Someone forcing you to sign a contract.
What is undue influence?
Someone having power over you to try to get you to sign a contract.
If someone is not old enough to sign a contract or lacks the competence to sign a contract for whatever reason, the contract becomes what?
Voidable (up to victim to make it void).
What does it mean to have an unenforceable contract?
Cant be enforced if the court deems it to be unfair or impossible.
What is the Statute of Frauds?
States that all real estate contracts must be in writing to be enforceable.
-The P&S needs to be in writing, as well the deed.
What is the Doctrine of Laches?
You lose your right to void a contract if you fail to assert the right within a reasonable time frame. The time frame would be decided by a judge.
What is a Statute of Limitations?
Hard legal limit as to when you can assert your rights to bring to bring someone to court.
Can be used to render a contract unenforceable after a certain time frame is passed (about 6 years).
Unilateral Contract
A contract where one party makes a promise, & the other party will need to perform in order to complete the contract.
Example: Radio contest, listing contract, etc.
Bilateral Contract
A contract where 2 (or more) parties make promises to one another.
example: P&S, lease, employment, offer to purchase, deed, etc.
Executory
The contract is not yet completed (the parties entered a contract, but it is not completed).
Executory Phase
Time between P&S and closing. Time where due diligence is done; inspections, financing, title search, etc.
Executed
When the transaction has been fully completed…AKA the closing.
Assignment
Transfer of a party’s rights & obligations to another.
Assignor
Gives the contract to someone.
Assignee
Receives the contract.
Novation
When you cancel a contract and have someone else sign a new one.
Power of Attorney
When someone else acts on your behalf.
Ironclad Clause
Any agreement outside the written contract will not have any effect.
Also known as the integration clause, merger clause, and entire agreement clause.
Severability
A clause stating that any part of a contract that is illegal will be voided, but the rest will remain in effect.
Contingency Clause
Makes a contract contingent on something happening (like obtaining financing).
If it doesn’t happen, the contract is voided.
Breach of Contract
One of the parties under the contract didn’t do what they promised.
Doctrine of Privity
Gives the party a right to sue the other party for a breach in contract.
When there is a breach of contract what can happen?
Rescission: Cancellation of the contract.
Specific Performance: A court order forcing the party in violation to comply w/ the terms of the contract.
Damages: Monetary compensation for harm suffered as a result of the breach.
Liquidated Damages: Per agreed upon monetary compensation for breach (like forfeiture: loss of deposit).
