LESSON 7: CONTENGENCIES, AGENDAS, AMENDMENTS Flashcards
What is duress in the context of contracts?
Duress is defined as exerting unlawful pressure on someone, coercing or forcing them to enter into a contract they would not otherwise have agreed to. This also extends to coercing family members.
Can you claim duress if someone threatens to foreclose on your property when they have the right to do so?
No, you cannot claim duress if the threat is lawful, such as foreclosing on a property where the lender has the right to do so. Signing the agreement is a choice to avoid the lawful action.
What is a contingency in a contract?
A contingency is an event or condition that must occur for the contract to be completed. Examples include financing contingencies where the buyer needs to obtain a loan.
What is Paragraph 7B in the TREC sales contract related to?
Paragraph 7B deals with the Seller’s Disclosure Notice. Choice 2 creates contingencies that do not benefit the seller, while Choices 1 and 3 do not create a contingency.
What does Paragraph 5B of the contract establish?
Paragraph 5B establishes a contingency if the buyer purchases an option to terminate within a certain time frame. Time is of the essence for compliance with the time for performance.
What is the Third Party Financing Addendum in a contract?
The Third Party Financing Addendum creates a contingency, dependent on the buyer obtaining financing approval and the property satisfying property approval requirements.
What is required for financing approval in a contract?
Financing approval is considered obtained when the buyer receives both Buyer Approval and Property Approval. Strict compliance with time for performance is required.
What does the Addendum for Sale of Other Property specify?
This addendum makes the contract contingent upon the buyer receiving proceeds from the sale of their property by a specific date. If the contingency is not met, the contract will automatically terminate.
What are some common contingencies in commercial transactions?
Common contingencies in commercial transactions relate to zoning approval, whether the local government will approve a zoning change, or whether a waiver or exception can be granted for local restrictions.
What is an amendment in a real estate contract?
An amendment is used to change the terms of a contract after it has been fully signed and agreed upon by both parties, such as altering the closing date, price, or agreeing to new repairs. The original document should never be changed after signing.
What is the difference between an addendum and an amendment?
An addendum is added to the original contract before it’s signed, whereas an amendment is used after the contract has been signed to make changes.
What should be done when making an amendment?
Both parties must sign the amendment, and it should have its own effective date. A copy should also be sent to the title company to ensure they have all the necessary details.
What is an escalation clause in a real estate contract?
An escalation clause allows a buyer to increase their offer if a higher offer is received, up to a specified amount. However, this clause can lead to complications and must be written carefully.
What are addenda in a real estate contract?
Addenda are materials added to and included in the initial contract, such as additional agreements or clarifications. These should be listed and included to ensure they are legally enforceable.
What is the Parole Evidence Rule?
This rule states that only the written contract will be considered in court, and any verbal agreements or representations outside of the contract cannot be used to influence the contract’s interpretation.
What is the Four Corners Rule?
The Four Corners Rule means that a court will interpret the contract based on its content alone, without considering any external factors.
What does “As Is” mean in a contract?
“As Is” means the property is being sold in its current condition, with no warranties, except for the warranties of title. This does not prevent negotiations for repairs or treatments during the amendment phase.
What is the Third Party Financing Addendum?
This addendum outlines how the buyer plans to secure financing for the property purchase, often including details on conventional financing.
What is the Addendum for Sale of Other Property by Buyer?
This addendum is used when a buyer needs to sell their current property before closing on a new one.
What is the Addendum for Property Subject to Mandatory Membership in Owners’ Association?
This addendum is used when the property is located in a community with mandatory membership in an owners’ association, and it requires disclosure of any restrictions and the financial health of the association.
What is the Addendum for Back-up Contract?
This addendum is used when a buyer wants to keep their offer in a backup position, in case the current offer on the property is not successful.
What is the Seller’s Temporary Residential Lease?
This lease agreement is used when the seller needs to stay in the property for a short period after closing, but the lease cannot exceed 90 days.
What is the Lead-Based Paint Addendum?
A federal requirement that informs the buyer about potential lead-based paint hazards in the property. It requires disclosure, the option for inspection, and acknowledgment of receipt of the information.
What is the Non-Reality Items Addendum used for?
The Non-Reality Items Addendum is used to specify items like furniture, collectibles, or other non-real estate items being sold along with the property, such as rifles, posters, or antique hitching posts.
What is the law regarding real estate licensees and residential service company referrals?
It is unlawful for real estate licensees to accept a fee from a residential service company for making a referral unless the relationship and how the income was earned are disclosed.
What is the Seller Financing Addendum?
The Seller Financing Addendum is used when the seller agrees to finance the buyer’s purchase of the property, typically when the buyer is unable to secure traditional financing.
What is the Notice to Prospective Buyer?
This notice reminds the buyer about the importance of title insurance or an abstract of title and is required when the contract is not on a TREC promulgated form.
What happens if the Release of Seller’s Liability on Loan to be Assumed is not approved by closing?
If the release of liability has not been approved, the contract can terminate and the earnest money refunded to the buyer (contingency), or closing can proceed without delay (no contingency).
What is the Addendum for Coastal Area Property?
The Addendum for Coastal Area Property is used when the property shares a boundary with submerged lands of the state, ensuring legal requirements are met for such properties.
What is the Addendum for Propane Gas?
This addendum is required for properties in a propane gas service area, informing the buyer of any additional costs for propane gas service and requiring a notice from the distributor be attached.
What is the Environmental Addendum?
The Environmental Addendum allows the buyer to negotiate a contract with a contingency to conduct environmental inspections, such as assessing endangered species or wetlands concerns.
What is the Texas Consumer Notice Concerning Hazards or Deficiencies?
This notice encourages buyers to conduct a home inspection, even though neither party is required to make repairs based on the inspection findings.
What is the Information About Brokerage Services (IABS) form?
The IABS form is required by Texas law to provide prospective buyers, tenants, sellers, and landlords with information about the broker’s services during the first substantive communication.
What is the Texas Consumer Protection Notice?
The Consumer Protection Notice provides information on how to file complaints with TREC and details about the TREC recovery funds. It must be displayed at the broker’s place of business and on their website.
How should the IABS and Consumer Protection Notice be posted online?
Both forms should be posted on the business website homepage in a noticeable location, with the IABS in at least 10-point font and the Consumer Protection Notice in at least 12-point font.
What are acceptable alternate ways to post the IABS and Consumer Protection Notice?
The forms can be posted as images (e.g., .jpg) on social media or websites, with labels like “Texas Real Estate Commission Information About Brokerage Services” or “Consumer Protection Notice” in the image captions.
