(Lesson 2) Real Estate Contracts (Unit #11) Flashcards
Define contract law
A contract is a voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act.
a contract must:
- be voluntary- no one may be forced into a contract
- be an agreement or a promise- a contract is essentially a legally enforceable promise
- be made by legally competent parties- the parties must be viewed by the law as capable of making a legally binding promise
- be supported by legal consideration-a contract must be supported by something of value that induces a party to enter into the contract, and that something must be legally sufficient to support a contract
- have to do with a legal act- no one may legally contract to do something illegal
define express contract (aka express agreement)
exists when the parties state the terms and show their intentions in words.
an express contract may be oral or written
define statute of frauds
certain types of contracts (including those for the sale of real property) must be in writing to be enforceable in a court of law.
define implied contract:
the agreements of the parties is demonstrated by their acts and conducts
bilateral contract versus unilateral contract:
bilateral contract: both parties promise to do something; one promise is given in exchange for another
**in real estate a sales contract is bilateral because the seller promises to sell a parcel of land and give the title in exchange for a sum of money from the buyer
unilateral contract: one sided agreement.
**an option contract to retains one option to possibly make a purchase later is an example of a unilateral contract
executed vs executory contracts:
executed contract: is when all parties have done their responsibility in upholding the contract and performed their promises.
executory contract: exists when one or both parties still have an act to perform.
what are the essential elements of a valid contract?
a contract must meet certain requirements to be considered legally valid. these include:
- offer and acceptance (counteroffers are made until agreement or no agreement is made)
- consideration
- legally competent parties
- consent
- legal purpose
Dealing with multiple offers:
A licensee should converse with the buyer, or seller about the opportunity should multiple offers arise, and how they would want to handle the situation. Ultimately decisions about how multiple offers are negotiated, presented and accepted are up to the buyer/seller.. not the licensee.
define consideration as it relates to contracts for the buyer and seller
the contract must be based on consideration: something of a legal value offered by one party and accepted by another to perform some legal act in exchange.
*there must be a definite statement in the contract showing that something of value was given (promised) in exchange for the others parties promise
what is a legally competent party:
They must be able to understand the nature of their actions or consequences. They must be of legal age, in Illinois that contractual capacity is 18.
Define reality consent
under the doctrine of reality of consent, a contract must be voluntary and free of influence. A mistake, misrepresentation, fraud, deprives the party of reality of the contract. Thus, making the contract voidable by the injured party…. If the other party decides to sue for the breach of contract, the injured party could argue as defense that the contract lacked reality of consent.
define legal purpose in a contract
a contract must be of legal purpose. a contract for an illegal purpose or against public policies is not a valid contract.
Validity of contracts: can be described as valid, void, voidable, or unenforceable, depending on the circumstances.
..
define a valid contract:
meets all the essential elements that make it legally sufficient in court of law
define a void contract:
has no legal means.. lacked one or more elements to make it a forceable contract. a void contract was never a legal contract.
define a voidable contract:
appears to be valid but may be revoked or disaffirmed by one or both parties based on some legal principle. if it is not disaffirmed a voidable contract may nevertheless end up being executed.
a contact entered under duress or intoxication, or as a result of fraud, mistake, or misrepresentation is always voidable
define an unenforceable contract:
may seem on the surface to be valid; however neither party can sue the other to force performance.
A contract may not be forceable if it is not in writing.
Performance of a contract:
Time is of essence: Means the contract must be perfumed within the time limit specified..
IF the contract does not state a certain time, then it must be done immediately or within a reasonable amount of time.
if the last day a deed or contract may be executed is on a holiday, or Sunday.. the deed may be executed on the next regular business day.
Define assignments:
assignments is a transfer of rights or duties under a contract. rights may be assigned to a third party (called the assignee) unless the contract forbids it.
example in practice: a elderly widower wants to move closer to his children.. his house has been on the market for some time. The widower is in the hospital at the time a buyer makes an offer to purchase, so he assigns his contract rights to his son. This allows the property to be sold in a real estate closing transaction without him being present or signing documents.
Define Novation
substation, for a new contracting over an existing one is called novation.
The new agreement may be amongst the same parties or a new party (this would be called novation of parties).
Define breach of contract
a breach of contract is a violation of any of the terms or conditions of a contract without legal excuse.
a contract may be terminated if it is breached by one of the parties.
Define specific performance:
if either the seller or buyer breaches the contract they may sue for specific performance unless the contract specifically states otherwise.
In a suit for specific performance, the buyer asks the court to force the seller to go through with the sale and convey the property as previously agreed.
Buyer remedies vs seller remedies
Buyer remedies: -suit for specific performance -suit for damages -rescind contract Seller remedies: -suit for specific performance -suit for damages -declare contract forfeited