Introduction to Contracts Flashcards
Explain performance and forbearance in contracts.
In contract language, “performance” means to do what one agreed to do. Some contracts require a party to refrain from doing something and that is called “forbearance”. Contracts may include both performance and forbearance requirements.
List the six elements required of a valid contract
Competent parties, consideration, mutual agreement, lawful objective, in writing and signed by the parties, contain a legal description
If deliberate deception, fraud, or false information is present, the agreement is what?
Not enforceable
What are the two commonly used legal descriptions in a contract?
Metes and bounds
Reference to a platted subdivision (lot, block, section, and subdivision name)
Define express and implied contracts.
An express contract is one in which all the terms and covenants of the agreement have been clearly stated and agreed to by all parties, whether verbally or in writing.
An implied contract is 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.
Real Estate License Act states that “A person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless what?
The promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document
Implied contracts consist of what?
Obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words
Words and conduct of the parties may create what type of relationship?
Agency relationship
Define bilateral and unilateral contracts.
A bilateral contract is one in which both parties promise to perform their respective parts of an agreement in exchange for performance by the other party.
In a unilateral contract, only one party promises to do something, provided the other party does something. The latter party is not obligated to perform any act, but the promising party must fulfill the promise if the other party chooses to perform.
The same criteria need to be proven to enforce a bilateral or unilateral contract in court. The four criteria needed are what?
The contract existed
The contract was broken
A loss was suffered
The person challenged was responsible
In its simplest terms, unilateral contracts involve what?
An action undertaken by one person or group alone
Options are always unilateral or bilateral contracts?
Unilateral
In terms of validity and enforceability, a court may construe the legal status of a contract in one of four ways. What are the four?
Valid, valid but unenforceable, void, voidable
Real estate contracts aren’t enforceable unless the parties have exchanged something of value. This value is called what?
Consideration
Explain the Statute of Frauds
Many states have a statute of frauds that protects consumers who enter into the types of contracts in which fraud is most likely to occur. Real estate and other contracts that fall under the statute must be in writing and they must be signed to be enforceable.
A voidable contract is one which initially appears to be valid, but is subject to what?
Cancellation by a party to the contract who is believed to have acted under some kind of disability
Define executed contract.
An executed contract is one that has been fully performed and fulfilled: neither party bears any further obligation.
Explain executory contract and give one example
An executory contract is one in which performance is yet to be completed. A sales contract prior to closing is an example of an executory contract.
When all of the requirements of an executory contract have taken place, the contract becomes what?
An executed contract
How should last minute changes to a contract be handled?
Each change should be initialed by the parties or an amendment should be completed, signed by all parties, and made part of the original contract.
In contract language, “performance” means
to do what one agreed to do. Some contracts require a party to refrain from doing something and that is called “forbearance”.
Default
is to fail to do something required by law or duty. Texas laws protect the rights of parties who have entered into valid contracts.
A breach
is something torn or broken. In contract law, it means that someone has broken his or her word.
Six Elements Required of a Valid Contract
Competent parties Consideration Mutual Agreement Lawful Objective In Writing and Signed by the Parties Contain a Legal Description
Competent Party
has the legal capacity to enter into a contract and may be held to the promises made in the agreement
Incompetent Party
may not be held to the terms of the contract.
Consideration is the exchange of promises
offered by one party to another to do or not do something.
The full consent of all parties to a contract is
Mutual agreement
Contracts are not valid that
require performance that is unlawful.
Most states require certain contracts to be
in writing and signed by all parties charged in the agreement in order to be enforceable in court.
A precise description (legal description) of the location of the land is
required so the parties know exactly what property is being transferred from seller to buyer.
The two commonly used types of legal description are
(1) metes and bounds, (2) reference to a platted subdivision (lot, block, section, and subdivision name).
Express Contract
one in which all the terms and covenants of the agreement have been clearly stated and agreed to by all parties, whether verbally or in writing.
Implied Contract
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.
Properties may be listed orally, but if the seller refuses to pay an orally agreed upon commission
the broker cannot look to the courts to compel the seller to pay
Bilateral contract
one in which both parties promise to perform their respective parts of an agreement in exchange for performance by the other party.
Unilateral Contract
only one party promises to do something, provided the other party does something. The latter party is not obligated to perform any act, but the promising party must fulfill the promise if the other party chooses to perform.
The same criteria need to be proven to enforce a bilateral or unilateral contract in court. In each situation, the following will need to be established:
The contract existed
The contract was broken
A loss was suffered
The person challenged was responsible
Both unilateral and bilateral contracts are
Enforceable in court
unilateral contracts involve
an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement.
In terms of validity and enforceability, a court may construe the legal status of a contract in one of four ways
Valid, Valid but unenforceable, Void, Voidable.
Valid Contract
one which meets the legal requirements for validity
Valid contract in writing
is enforceable within a statutory time period.
An oral long-term lease and an oral real estate sales contract are examples of
contracts that may be valid but not enforceable.
A Void Contract
an agreement that does not meet the tests for validity, and therefore is no contract at all. If a contract is void, neither party can enforce it.
Voidable Contract
one 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. Only the party who claims the disability may cancel the legal effect of the contract.
A voidable contract differs from a void contract in that
the void contract does not require an act of disaffirmation to make it unenforceable.
An unenforceable contract
is a contract which cannot be enforced in a court of law. This could happen because the terms of the contract are ambiguous, if one party has a voidable contract or if the Statute of Limitations has expired.
Executed Contract
is one that has been fully performed and fulfilled: neither party bears any further obligation.
As a licensee, one of the many duties includes
Facilitating Agreements
Properly executed documents will save future problems from occurring.
Executory Contract
is one in which performance is yet to be completed. A sales contract prior to closing is executory. While the parties have agreed to buy and sell, the buyer has yet to pay the seller and the seller has yet to deed the property to the buyer.
In most cases, the resulting contract, until the two parties meet all the conditions within it
remains an executory contract
When all of the requirements of an executory contract have taken place
The contract becomes an executed contract
