: Elements of a Valid Contract Flashcards
A stated (written or oral) agreement between two or more parties that’s expressed out loud or on paper
express contract
A contract based on the actions or behaviors of the parties, not on words, and implied by actions
implied contract
A contract that involves the parties exchanging promises to perform specific actions and that is two-sided, with both sides having certain obligations
bilateral contract
A contract in which consideration (such as a promise) is given only by one party, and the other party is under no contractual obligation to perform or comply with the contract terms
unilateral contract
A contract that meets all the criteria for validity, including compliance with local laws, and may be held up in a court of law.
enforceable contract
A contract that cannot be enforced in a court of law and that may be missing one or more elements for validity, or it may appear to be valid, but not comply with local laws, such as the state’s statute of frauds
unenforceable contract
There are five additional essential elements to a valid real estate contract including it being in writing. These are:
There are five additional essential elements to a valid real estate contract. These are:
Legally competent parties
Offer and acceptance
Consent
Legal purpose
Consideration
The giving of something of value, which can include the agreement to not do something. Consideration is a required element of a binding contract.
Ex. Carly is a buyer and Wade is a seller. Carly gives Wade earnest money and a promise to purchase his property. This is her__________. Wade’s consideration to Carly is his agreement to sell his property.
consideration
what act gives electronic signatures, records, and contracts the same legal recognition as paper documents and handwritten signatures. The National Conference of Commissioners on Uniform State Laws (NCCUSL) created the UETA to standardize state laws on electronic transactions and provide clear rules for their use.
The Uniform Electronic Transactions Act (UETA
The discharging (ending) of a contract through the full completion of all terms
performance of a contract
When a new party to a contract agrees to satisfy the former party’s obligations. Unless there is a novation (a new contract) the original parties remain liable for the contract terms.
Ex. Ty decided to take an African Safari in the middle of his transaction. His brother agreed to have the contract assigned to him. However, Ty remains responsible unless a new contract is drawn up, naming his brother as the contracted party.
assignment (contracts)
The substitution of a new contract for a prior contract, or a new party for an old party
novation
To take back, remove or annul
rescission
A lease that ends on a specific date, like December 31
Estate for years
A lease that ends on December 31, but will be automatically renewed for another year
Periodic estate
A lease without an established time period
Estate at will
A holdover tenant (someone who didn’t leave when the lease expired) has this kind of possession
Estate at sufferance
The contract that allows a tenant to live on the property
lease
A right of possession for a limited period of time
Leasehold estate
Illegal eviction in which the landlord has taken matters into his own hands and evicts the tenant without using legal procedures.
Self-help eviction
An agreement for a new occupant to live in the premises and pay rent to the former tenant, who pays the landlord.
Requires landlord’s written permission; doesn’t relieve the former tenant from liability.
Sublease
A situation in which the tenant is prohibited from quiet enjoyment of the premises and vacates.
In such cases, the tenant is evicted for all practical purposes because enjoyment of the premises is not available.
Constructive eviction
A tenant’s right to enjoy the property without being dispossessed or trespassed upon.
Quiet enjoyment
Because leases are contracts, the same laws governing other contracts apply to creating a valid lease. These include:
Offer
Acceptance
Legal capacity
Legal purpose
Consideration
Mutual assent
Because leases are contracts, the same laws governing other contracts apply to creating a valid lease.
true or false
true
Leases establish the covenants (or promises) between the parties. Leases must include the following contractual provisions:
The capacity to contract
A description of the premises.
A clear statement of the “term” or length of the lease. .
Specification of rent and how it is to be paid (consideration).
the right of first refusal
Improvements are not required.
Contracts must be signed by all parties.
Long-term leases must be in writing.
Use provisions must be included.
What does “capacity to contract” in a lease refer to?
The legal requirement that anyone who signs a lease must be competent enough to do so (e.g., sane and of legal age)
Some residential lease agreements give tenants the option to purchase the property before that leased property can be sold to someone else. This is known as _______.
Right of first refusal
What are the three primary types of commercial property leases?
gross, net, and percentage
The landlord pays all expenses related to the property.
Gross lease
The tenant pays some or all expenses separately.
net lease
The tenant pays a base rent plus a percentage of its gross sales.
percentage lease
With which type of lease will you hear the term “natural break-even point”?
Percentage lease
, a percentage lease is more commonly used in retail properties, such as shopping centers and malls. What’s a typical lease for a multi-tenant industrial building?
modified gross
This option is often used by prospective purchasers who can’t purchase immediately but intend to soon, and would like to buy the property they’re renting.
Lease with option to buy
With this option, the holder can decide when and whether to exercise the right to the property.
Lease with option to buy
With this option, the holder must wait until an event occurs (another offer is made on the property by a third party) and then must decide whether to exercise the option, or let the property go.
Right of first refusal
In an option contract, only the seller is bound by the contract until the buyer decides to buy, making it a one-sided (_________) contract.
unilateral
Common Uses of Option Contracts include what
Lease Option: A renter (lessee) has the right to buy the home at the end of the lease. This gives them time to save money or get financing.
Investment & Development: Investors buy an option on land in a good location. They find investors or developers who will pay more, then buy the land and sell it at a profit.
Due Diligence: Buyers use option contracts to check if the property suits their needs before committing to a full purchase.
Can you define an option contract?
An offer to purchase a specific piece of real estate but without the obligation to buy it
a option contract must contain all the terms and provisions required by law for a valid contract which are what
To be enforceable, there must be consideration
It must state how long the option period
It must comply with the statute of frauds, which means it must be:
Written
Signed by the optionor
must clearly state any other terms or conditions that apply to the optionee’s exercise of the option to purchase the property.
A distressed property is property that’s in
foreclosure, is a short sale, or has been repossessed by the bank and is now a real estate owned (REO) property.
_______ land is land that has no structures built upon it, but may have essential services available.
vacant
_________ land is raw land—land that’s not been developed and is missing essential services that would expand its use beyond natural beauty and livestock grazing.
unimproved land
Keira calls her favorite title representative and orders a trio for the property. What three items will she receive?
Property profile
deed
Assessor map
What are three reasons someone might ask whether the owners have recently refinanced?
To determine the seller’s total loan balance
To find out the appraised value
To see if funds were used for property improvements
what are the five characteristics unique to the real estate market.
Immobility
Uniqueness
Indestructibility
slow to respond to supply changes
Highly Influenced by Governmental Policy
what is the order of importance for comparable properties
location,
sales date
size
number of bedroom/baths
a hot market is also known as a sellers market a cold market is also known as a what
buyers market
Which of these describes the method for determining the indicated value of a subject property when a licensee performs a market analysis?
Sales price of comparable ± adjustments
when comparing a subject property to a comparable what property are additions and subtractions done to
the comparable
