Introduction to Contracts

Question 1

Explain performance and forbearance in contracts.

Answer 1

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.

Question 2

List the six elements required of a valid contract

Answer 2

Competent parties, consideration, mutual agreement, lawful objective, in writing and signed by the parties, contain a legal description

Question 3

If deliberate deception, fraud, or false information is present, the agreement is what?

Answer 3

Not enforceable

Question 4

What are the two commonly used legal descriptions in a contract?

Answer 4

Metes and bounds

Reference to a platted subdivision (lot, block, section, and subdivision name)

Question 5

Define express and implied contracts.

Answer 5

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.

Question 6

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?

Answer 6

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

Question 7

Implied contracts consist of what?

Answer 7

Obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words

Question 8

Words and conduct of the parties may create what type of relationship?

Answer 8

Agency relationship

Question 9

Define bilateral and unilateral contracts.

Answer 9

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.

Question 10

The same criteria need to be proven to enforce a bilateral or unilateral contract in court. The four criteria needed are what?

Answer 10

The contract existed
The contract was broken
A loss was suffered
The person challenged was responsible

Question 11

In its simplest terms, unilateral contracts involve what?

Answer 11

An action undertaken by one person or group alone

Question 12

Options are always unilateral or bilateral contracts?

Answer 12

Unilateral

Question 13

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?

Answer 13

Valid, valid but unenforceable, void, voidable

Question 14

Real estate contracts aren’t enforceable unless the parties have exchanged something of value. This value is called what?

Answer 14

Consideration

Question 15

Explain the Statute of Frauds

Answer 15

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.

Question 16

A voidable contract is one which initially appears to be valid, but is subject to what?

Answer 16

Cancellation by a party to the contract who is believed to have acted under some kind of disability

Question 17

Define executed contract.

Answer 17

An executed contract is one that has been fully performed and fulfilled: neither party bears any further obligation.

Question 18

Explain executory contract and give one example

Answer 18

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.

Question 19

When all of the requirements of an executory contract have taken place, the contract becomes what?

Answer 19

An executed contract

Question 20

How should last minute changes to a contract be handled?

Answer 20

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.

Question 21

In contract language, “performance” means

Answer 21

to do what one agreed to do. Some contracts require a party to refrain from doing something and that is called “forbearance”.

Question 22

Default

Answer 22

is to fail to do something required by law or duty. Texas laws protect the rights of parties who have entered into valid contracts.

Question 23

A breach

Answer 23

is something torn or broken. In contract law, it means that someone has broken his or her word.

Question 24

Six Elements Required of a Valid Contract

Answer 24

Competent parties
Consideration
Mutual Agreement
Lawful Objective
In Writing and Signed by the Parties
Contain a Legal Description

Question 25

Competent Party

Answer 25

has the legal capacity to enter into a contract and may be held to the promises made in the agreement

Question 26

Incompetent Party

Answer 26

may not be held to the terms of the contract.

Question 27

Consideration is the exchange of promises

Answer 27

offered by one party to another to do or not do something.

Question 28

The full consent of all parties to a contract is

Answer 28

Mutual agreement

Question 29

Contracts are not valid that

Answer 29

require performance that is unlawful.

Question 30

Most states require certain contracts to be

Answer 30

in writing and signed by all parties charged in the agreement in order to be enforceable in court.

Question 31

A precise description (legal description) of the location of the land is

Answer 31

required so the parties know exactly what property is being transferred from seller to buyer.

Question 32

The two commonly used types of legal description are

Answer 32

(1) metes and bounds, (2) reference to a platted subdivision (lot, block, section, and subdivision name).

Question 33

Express Contract

Answer 33

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.

Question 34

Implied Contract

Answer 34

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 35

Properties may be listed orally, but if the seller refuses to pay an orally agreed upon commission

Answer 35

the broker cannot look to the courts to compel the seller to pay

Question 36

Bilateral contract

Answer 36

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

Question 37

Unilateral Contract

Answer 37

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.

Question 38

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:

Answer 38

The contract existed
The contract was broken
A loss was suffered
The person challenged was responsible

Question 39

Both unilateral and bilateral contracts are

Answer 39

Enforceable in court

Question 40

unilateral contracts involve

Answer 40

an action undertaken by one person or group alone. In contract law, unilateral contracts allow only one person to make a promise or agreement.

Question 41

In terms of validity and enforceability, a court may construe the legal status of a contract in one of four ways

Answer 41

Valid, Valid but unenforceable, Void, Voidable.

Question 42

Valid Contract

Answer 42

one which meets the legal requirements for validity

Question 43

Valid contract in writing

Answer 43

is enforceable within a statutory time period.

Question 44

An oral long-term lease and an oral real estate sales contract are examples of

Answer 44

contracts that may be valid but not enforceable.

Question 45

A Void Contract

Answer 45

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.

Question 46

Voidable Contract

Answer 46

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.

Question 47

A voidable contract differs from a void contract in that

Answer 47

the void contract does not require an act of disaffirmation to make it unenforceable.

Question 48

An unenforceable contract

Answer 48

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.

Question 49

Executed Contract

Answer 49

is one that has been fully performed and fulfilled: neither party bears any further obligation.

Question 50

As a licensee, one of the many duties includes

Answer 50

Facilitating Agreements

Properly executed documents will save future problems from occurring.

Question 51

Executory Contract

Answer 51

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.

Question 52

In most cases, the resulting contract, until the two parties meet all the conditions within it

Answer 52

remains an executory contract

Question 53

When all of the requirements of an executory contract have taken place

Answer 53

The contract becomes an executed contract