Contracts - General

Question 1

What are the elements of a valid contract in California?

Answer 1

• Legally competent parties capable of contracting
• Mutual consent (also known as offer and acceptance)
• Legal purpose
• Sufficient consideration

Question 2

Who are legally competent parties, and what happens if a contract is made with someone who is not?

Answer 2

Legally and mentally enter a contract.

They can choose to void it, but the contract can still be enforced.

Question 3

Can minors enter into contracts, and are these contracts enforceable?

Answer 3

Minors can enter into contracts, but these contracts are not enforceable

Question 4

What does California law say about minors entering into real estate contracts, and are there any exceptions?

Answer 4

Prohibits minors (under 18) from entering into any real estate contracts, such as buying or selling property, and real estate agents cannot represent minors in these transactions.

Question 5

Who are some of the parties that may enter into a contract?

Answer 5

• emancipated minors
• aliens
• individual proprietors
• partnerships
• limited liability companies
• corporations
• nonprofit associations
• personal representatives
• convicts.

(M.A.I.P.P.L.C.C.N - MAI’S PLACE IN NORWOOD)

Question 6

What is mutual consent (offer and acceptance) in a contract, and what can invalidate it?

Answer 6

when parties agree voluntarily and fully understand the contract terms. Contract is not valid if there are mistakes, misrepresentation, fraud, duress, or undue influence.

Question 7

What does a signature signify in a contract, and is a signature necessary for a contract to be valid?

Answer 7

It confirms a party’s understanding and intention of the contract terms. Signatures make it easier to enforce the contract in court.

Question 8

What does “legal purpose” mean in a contract, and what happens if a contract is written for an illegal purpose?

Answer 8

Contract must result in a legal outcome. If a contract is written for an illegal purpose, it is void and unenforceable.

Question 9

What is consideration in a contract, and what is an example of consideration?

Answer 9

Contract is something valuable that each party gives or promises to give to the other. For example, a buyer gives money to a seller in exchange for the seller transferring ownership of the property with a deed.

Question 10

What is valuable consideration in a contract?

Answer 10

A promise to give something valuable to someone else, whether it’s a loss for the promisor or a gain for the other party, is a crucial part of a contract that makes it legally binding.

Ex. When Biff promised to give Calli his jet ski in return for her horse trailer, the trailer and jet ski were valuable considerations in their agreement.

Question 11

What is consideration?

Answer 11

The giving of something of value, which can include the agreement to not do something. Consideration is a required element of a binding contract.

Question 12

Is earnest money considered consideration in a real estate contract, and is it necessary for a valid contract?

Answer 12

Earnest money in a real estate contract is not considered consideration, and it is not a required element for a valid contract.

Question 13

Can a contract be valid but unenforceable, and what is an example?

Answer 13

Yes, a contract may be valid but unenforceable. For instance, a voidable contract is considered valid but may not be enforceable in court.

Question 14

Contracts signed under the following circumstances are unenforceable:

Answer 14

• The contract is for an illegal purpose.
• Under duress or undue influence.
• Misrepresentation.
• The contract terms are unfair or violate public policy.
• The contract contains errors.

Question 15

Why does the statute of frauds require certain contracts, such as property transfers, to be in writing?

Answer 15

It must be in writing to be legally enforceable and to prevent fraudulent conduct.

Question 16

What happens to a contract that doesn’t comply with the statute of frauds?

Answer 16

Can still be valid, but it’s unenforceable.

Question 17

The statute of frauds also requires written contracts to:

Answer 17

• Identify the contracting parties
• Identify the subject matter of the contract
• Present the essential terms and conditions of the contract

Question 18

What is a voidable contract?

Answer 18

it’s valid, but one or both parties can cancel it because of legal incapacity, mistake, or misrepresentation. It can be canceled by the affected party but enforced by the other party.

Question 19

What is meant by a void contract?

Answer 19

A void contract lacks the necessary requirements for validity. It has no legal effect and cannot be enforced.

Question 20

What does “performance” mean in contractual terms?

Answer 20

refers to fulfilling or meeting the terms of the contract.

Question 21

What should the parties do when executing a contract?

Answer 21

The parties should act in good faith and avoid deceptive practices while fulfilling the contract.

Question 22

What is required of all parties regarding contract terms?

Answer 22

All parties must fulfill contract terms promptly (time is of the essence).

Question 23

What does it mean for a contract to be executed?

Answer 23

all parties have fulfilled all contract terms. For example, in a real estate sale, it’s executed when the deed is delivered and accepted, and the purchase price is paid.

Question 24

What does it mean for a contract to be executory?

Answer 24

When all promises in the contract are fulfilled. For instance, in a real estate sale, the contract remains executory until the deed is delivered and accepted.

Question 25

What is breach of contract?

Answer 25

When one party fails to fulfill their obligations under the contract. The innocent party can choose from several actions to resolve the breach.

Question 26

What is partial performance in a contract?

Answer 26

When one party fulfills some, but not all, of the terms specified in the contract.

Question 27

What can the innocent party do if there is partial performance of a contract?

Answer 27

May agree to accept in exchange for some form of compensation.

Question 28

What can the innocent party do to seek compensation in case of a breach of contract?

Answer 28

Can sue for damages, which involves seeking monetary compensation to cover any harm caused by the breach.

Question 29

What is the goal of a specific performance suit in contract disputes?

Answer 29

Aims to make a party fulfill their promises as agreed in the contract, usually by requiring them to perform the original contract terms.

Question 30

What is a liquidated damages clause commonly found in real estate contracts?

Answer 30

A liquidated damages clause in real estate contracts limits buyer damages to the return of earnest money if the seller breaches the contract.

Question 31

What does it mean when a contract is discharged (performance or execution)?

Answer 31

Contract discharge means that the parties have completed all contract terms and are no longer obligated by the contract.

Question 32

What does “release” mean in a contract?

Answer 32

In a contract, “release” happens when one party agrees in writing that the other party is no longer obligated by the terms of the agreement.

Question 33

What is contract rescission?

Answer 33

when a contract is canceled due to legal reasons like breach of contract or destruction of the contract’s subject. It ends the contract, returning both parties to their positions before the contract was made.

Question 34

What is unilateral rescission?

Answer 34

if one party breaks the agreement, the other may have the right to cancel it

Question 35

How can parties terminate a contract by mutual agreement?

Answer 35

Parties can terminate a contract by mutual agreement, usually through a written release that both parties sign.

Question 36

What does “assignment” mean in a contract?

Answer 36

transferring contractual rights or duties to another party. Adding “and or assigns” after a party’s name makes the contract assignable. The original party may still be liable unless released from obligations when a new party takes over.

Question 37

What is novation in a contract?

Answer 37

Novation in a contract occurs when one contract is replaced with another. It can involve the same parties or a new party (novation of the parties). The goal is to release the original party from their obligations under the old contract.

Question 38

How are additions to pre-printed forms interpreted based on their priority?

Answer 38

In pre-printed forms, typed additions are more important than pre-printed text, and handwritten additions are more significant than both typed and pre-printed text. Also, alphabetically written-out numbers are given precedence over numerical digits.

Question 39

Who governs the use of electronic documents and signatures?

Answer 39

State laws govern the use of electronic documents and signatures.

Question 40

What does the Uniform Electronic Transactions Act (UETA) aim to achieve?

Answer 40

The Uniform Electronic Transactions Act (UETA) standardizes state laws on electronic documents and signatures, giving them the same legal validity as traditional paper documents signed by hand in ink.

Question 41

What is defined as an electronic signature under the Uniform Electronic Transactions Act (UETA)?

Answer 41

Under the UETA, an electronic signature is an electronic sound, symbol, or process attached to or logically associated with a record. It is used by a person with the intent to sign the document.

Question 42

Under what conditions can electronic documents and signatures be used?

Answer 42

Electronic documents and signatures can only be used if all parties involved in the contract agree to their use.

Question 43

What is a bilateral contract?

Answer 43

A bilateral contract involves obligations for both parties. In real estate contracts, such as a purchase agreement, both buyer and seller make promises, making it bilateral.

Question 44

What is a unilateral contract?

Answer 44

In a unilateral contract, only one party makes a promise. An option contract is one example of a unilateral real estate contract.

Question 45

What is a contract clause?

Answer 45

A contract clause is a specific section or provision in a contract that addresses a particular legal point or aspect of the agreement.

Question 46

What are examples of common contract clauses?

Answer 46

• Choice of law: Decides which jurisdiction’s laws apply to disputes.
• Indemnification: Requires compensating for losses or liabilities.
• Contingency clauses: Set conditions to avoid breaching the contract.
• Arbitration clause: Mandates using arbitration for dispute resolution.
• Mediation clause: Requires attempting mediation before legal action.
• Statute of limitations: Defines the timeframe for filing contract-related lawsuits, like four years for written contracts in California.

Question 47

What are amendments and addenda in a contract?

Answer 47

Amendments or addenda are documents used to include terms outside the main contract that parties agree upon. Together with the main contract, these documents form the complete agreement between the parties.

Question 48

What is an addendum in a contract?

Answer 48

An addendum is an addition to an existing document, such as an offer to purchase. It includes terms that are not covered in the main body of the contract form.

Question 49

What is an amendment in a contract?

Answer 49

An amendment is when parties change one or more terms of an existing contract. For example, they might adjust the closing date or decide whether certain items stay with the property.

Question 50

What should the broker do regarding addendum and amendment forms?

Answer 50

The broker should recommend and/or approve addendum and amendment forms.