Key Terms Flashcards
A voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act.
Contract
The general body of law that governs contracts is called…
Contract law
An express contract is also called…
an express agreement
A(n) ___ contract exists when the parties state the terms and show their intentions in words.
Express
An express contract may be ___ or ___.
Oral or written
The part of a state law that requires certain instruments, such as deeds, real estate sales contracts, and certain leases, be in writing to be legally enforceable
Statute of frauds
Under the statute of frauds, certain types of contracts must be ___ to be enforceable in a court of law.
in writing
Contract where the agreement of parties is demonstrated by their acts and conduct
Implied Contract
If a buyer signs an offer to purchase a house for $350,000 and the seller signs the contract in agreement, this is a(n) ___ contract.
Express
When a diner orders a meal in a restaurant, they have entered a(n) ___ contract with the restaurant to pay for the meal, even though payment was not mentioned before the meal was ordered.
Implied
Illinois state law that requires any contracts for the sale of land, or for leases that will not be fulfilled within one year from the date they are entered into, must be in writing to be enforceable in court.
Illinois Frauds Act
In a(n) ___ contract, both parties promise to do something
Bilateral
In a(n) ___ contract, one promise is given in exchange for another
Bilateral
A real estate sales contract is a(n) ___ contract because the seller promises to sell a parcel of real estate and convey property title to the buyer, and the buyer in turn promises to pay a certain sum of money for the proeprty.
Bilateral
A(n) ___ contract is a one-sided agreement
Unilateral
In a(n) ___ contract, one party makes a promise to induce a second party to do something.
Unilateral
In a(n) ___ contract, the second party is not legally obligated to act, however if they do not comply, the first party is obligated to keep the promise.
Unilateral
An option contract to retain one’s option to possibly make a purchase later is an example of a(n) ___ contract
Unilateral
In Illinois, an exclusive right-to-sell listing agreement is considered to be a(n) ___ contract.
Bilateral
In Illinois, an open listing agreement is a(n) ___ contract.
Unilateral
A(n) ___ contract is one in which all parties have fulfilled their promises and the contract has been performed.
Executed
A(n) ___ contract exists when one or both parties still have an act to perform.
Executory
A sales contract is a(n) ___ contract from the time it is signed until closing.
Executory
A sales contract is ___ at closing.
Executed
“Meeting of the minds” refers to which 2 essential components of a valid contract?
Offer and acceptance
The person who makes an offer
Offeror
The person who accepts or rejects an offer
Offeree
Complete agreement about the purpose and terms of a contract
Mutual Assent
Mutual Assent refers to…
offer and acceptance
A promise made by one party, requesting something in exchange for that promise.
Offer
A new offer made in response to an offer received
Counteroffer
A(n) ___ has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.
Counteroffer
If a seller agrees to the original offer or a later counteroffer exactly as it is made and signs the document, the offer has been ___.
Accepted
An offer may be terminated either by ___ or ___.
Counteroffer or rejection
A contract must be based on ___, which is something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act.
Consideration
There must be a definite statement of ___ in a contract to show that something of value was given or promised in exchange for the other party’s promise.
consideration
Anything that has been bargained for and exchanged is legally sufficient to satisfy the requirement for ___.
Consideration
To satisfy the requirement for consideration, all parties must ___ and no undue influence or fraud occurred.
agree
All parties to a contract must be of legal age and have enough mental capacity to understand the nature or consequences of their actions in a contract. This is because all parties must have ___.
legal capacity
Under the doctrine of ___, a contract must be entered into as the free and voluntary act of each party.
Reality of consent
Under the reality of consent doctrine, each party must be able to make a prudent and knowledgeable decision without ___.
Undue influence
A mistake, fraud, misrepresentation, undue influence, or duress deprives a person of what ablility?
Consent
If there is a circumstance of mistake, fraud, misrepresentation, undue influence, or duress, the contract is ___ by the injured party.
Voidable
A contract must be for a(n) ___.
Legal purpose
A contract for an illegal purpose or an act against public policies is not ___.
Valid
A(n) ___ contract meets all the essential elements that make it legally sufficient or enforceable and is binding in a court of law.
Valid
A(n) ___ contract has no legal force or effect because it lacks some or all of the essential elements of a contract. It was never a legal contract.
Void
A(n) ___ contract appears on the surface to be valid, but may be rescinded or disaffirmed by one or both parties based on some legal principle.
Voidable
If a voidable contract is not ___, it may end up being executed.
disaffirmed
A(n) ___ contract is considered by the courts to be valid if the party who has the option to disaffirm the agreement does not do so within a period of time prescribed by state law.
Voidable
A(n) ___ contract may seem on the surface to be valid, however neither party can sue the other to force performance.
Unenforceable
A contract may be ___ if it is not in writing, as may be required under the statute of frauds.
Unenforceable
If a contract contains any ___, the courts generally interpret the agreement against the party who prepared it.
Ambiguity
A phrase in a contract that requires the performance of a certain act within a stated period of time
Time is of the essence
A transfer of rights or duties under a contract
Assignment
When rights are assigned to a third party, this person is called the ___.
Assignee
Substitution of a new contract for an existing contract
Novation
A violation of any of the terms or conditions of a contract without legal excuse
Breach of contract
A legal action to compel a party to carry out the terms of a contract
Specific performance
Rescind
Cancel
Clause that permits the seller to keep the earnest money deposit and any other payments received from the buyer as the seller’s sole remedy.
Liquidated Damages Clause
A contract may be terminated if ___ occurs, which is when one party has performed enough to force payment on the contract, but does not complete all details exactly as the contract requires.
Substantial performance
___ performance may be enough to force payment, with certain adjustments for any damages suffered by the other party.
Substantial
A contract may be terminated if ___ occurs, which is when an act required by the contract cannot be legally accomplished
Impossibility of performance
A contract may be terminated by ___ of both parties to cancel.
mutual agreement
A contract may be terminated by ___, such as in the voiding of a contract as a result of fraud, due to the expiration of the statute of limitations, or because a contract was altered without the written consent of all parties involved.
Operation of law
A contract may terminate by ___, in which one party may cancel or terminate the contract as though it had never been made.
Rescission
If a contract is terminated by rescission, cancellation returns parties to their ___.
Original position before contract
If a contract terminates by rescission, any moneys that have been exchanged must be ___.
Returned
___ is normally a contractual remedy for a breach.
Rescission
A contract may be rescinded as a remedy for a breach, or by ___ of parties.
mutual agreement
A(n) ___ is an employment contract that establishes the rights and obligations of the sponsoring broker as agent and the seller as principal.
Listing agreement
Listing and buyer agency agreements are ___ contracts.
Employment
A(n) ___ is an employment contract that establishes the relationship between a buyer as principal and sponsoring broker as agent.
buyer agency agreement
In a listing agreement, who is the principal?
Seller
In a buyer agency agreement, who is the principal?
Buyer
A(n) ___ contract contains the complete agreement between the buyer of a parcel of real estate and the seller.
Real estate sales
Offer to purchase, contract of purchase and sale, purchase agreement, earnest money agreement, deposit receipt, or sales contract are area specific names for what kind of contract?
Real estate sales contracts
In Illinois, if a real estate sales contract is accepted and signed by the seller, it becomes a(n) ___.
Contract of sale
When a contract transforms from real estate sales contract to a contract of sale after an offer has been accepted and signed by the seller, this transformation is called ___ the contract.
Ripening
The ___ is the most important document in the sale of real estate.
Contract of Sale
The ___ establishes legal rights and obligations of the buyer and seller.
Contract of sale
Title to personal property usually is transferred by a(n) ___.
Bill of sale
Who prepares the bill of sale?
The attorney
A(n) ___ covers the cost to fix or replace an item in the home, such as kitchen appliances, washers/dryers, doorbells, furnace/heating, water heaters, ductwork, garbage disposables, plumbing, cieling fans, and electrical systems.
Home warranty
___ warranties are warranties that are supplied by the seller or building contractor of a newly constructed home
Construction
___ warranties will state that the structure is free of structural, electrical, plumbing, and other defects and is fit for the intended purpose.
Construction
___ warranties typically cover dry basement, clapboard and shingles, landscaping, carpentry, thermal and moisture cover, waterproofing, insulation, roofing and siding, doors and windows, glass, garage doors, paint, plumbing, electrical, heating and cooling, and the septic system
Construction
___ is evidence of the buyer’s intention to carry out the terms of a contract in good faith.
Earnest money deposit
Money deposited by a buyer under the terms of a contract
Earnest money
___ may be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
Earnest money
A check for an earnest money deposit should not be delivered to the listing sponsoring broker until there is a(n) ___.
Sales contract
The amount in a(n) ___ deposit should be sufficient to discourage the buyer from defaulting
earnest money
The amount in a(n) ___ deposit should be sufficient to help the seller feel comfortable in taking the property off the market
earnest money
The amount in a(n) ___ deposit should be sufficient to cover any expenses the seller might incur if the buyer defaults
earnest money
Sponsoring brokers who are holding earnest money deposits and security deposits must establish special trust accounts called ___ for the deposit of funds entrusted to them in connection with real estate transactions
Escrow accounts
The illegal act by a real estate licensee of mingling client or customer funds with the licensee’s personal funds
Commingling
If a real estate licensee mixes their own funds with funds in special escrow accounts, this is ___.
Commingling
If a sponsoring broker uses their own funds to avoid incurring service charges on an escrow account, ___ must be kept.
Scrupulous records
The illegal act of a sponsoring broker using escrow funds for personal use
Conversion
The wrongful appropriation of property belonging to another
Conversion
The right to obtain absolute ownership to property when legal title is held in another’s name
Equitable title
An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract
Liquidated damages
To avoid a lawsuit if one party breaches the contract, the parties may agree on a certain amount of money that will compensate the nonbreaching party called ___.
Liquidated damages
What are the 3 elements of a contingency?
1) Specific actions necessary
2) Time frame in which the actions must occur
3) Who is responsible for paying
A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding
Contingency
If the buyer is unable to secure financing, the contract will be rescinded. This is a(n) ___.
Mortgage contingency
A sales contract may be contingent on the buyer obtaining certain inspections of the property within a set time frame. What type of contingency is this?
Inspection contingency
A(n) ___ contingency allows both parties to have the option of having the contract reviewed with changes made by their attorney, including canceling the contract.
Attorney
A(n) ___ contingency allows buyers to make the sales contract contingent on the sale of their current home by a certain date.
Property sale
A(n) ___ contingency protects the buyer from owning 2 homes at the same time and also helps ensure the availability of cash for the purchase.
Property sale
A seller may insist on a(n) ___ which permits the seller to continue to market the property until all the buyer’s contingencies have been satisfied or removed.
Escape clause
Contingencies create a(n) ___ contract.
Voidable
If contingencies are rejected or not satisfied, the contract is ___.
Void
A change to an existing contract
Amendment
Any time words or provisions are added to or deleted from the body of the contract, the contract has been ___.
Amended
Amendments must be ___ or ___ by all parties
signed or initialed
Any provision added to an existing contract without altering the content of the original
Addendum
A contract by which an owner gives a prospective purchaser or lessee the right to buy or lease the owner’s property at a fixed price within a certain period.
Option
In an option contract, the ___ is generally the owner.
optionor
In an option contract, the ___ is generally the prospective purchaser or lessee
Optionee
An option is only enforceable by which party?
the optionee
A(n) ___ contract is also called a contract for deed, installment contract, or articles of agreement for warranty deed.
Land contract
In a land contract, the seller is the ___.
Vendor
In a land contract, the buyer is the ___.
Vendee
A contract for the sale of real estate where the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until all payments are received in full.
Land Contract
Due to the unique and often complex nature of commercial real estate transactions, many commercial contracts start off as an exchange of ___.
Letters of Intent
___ are not meant to be binding agreements but are only the starting place for a future contract in the sale of commercial real estate.
Letters of Intent
A letter of intent is ___.
Nonbinding
A letter of intent is intended simply for the purposes of ___.
negotiation
