Morgan's (VII) Flashcards
A ___ contract refers to one that includes certain critical elements and so has full legal force and effect.
Valid
An ___ contract lacks at least one of those critical elements and is therefore either void or voidable.
Invalid
A contract that has no legal force due to its lack of one or more elements required for validity
Void contract
A contract this is seen as binding on one party but not on the other, who is free to pursue it or void it
Voidable contract
A contract in which only one party has made a promise to do something
Unilateral (or one-sided)
Contract in which both parties have made a promise and are obligated to follow through on all of the contract’s conditions
Bilateral (or two-sided)
A contract that meets the legal requirements for validity and there is binding on all parties to observe their contractual obligations
Enforceable contract
What makes a contract unenforceable?
A void contract or one that was valid when made but legally unenforceable due to some technical fine point
What is the difference between express and implied contracts?
Express - typically in writing, though can be oral (explicitly set out)
Implied - not explicit
What are the 2 possible meanings of the word execute?
- Sign the contract
2. Fulfill and complete the contract’s conditions
A contract that is in the process of being fulfilled
Executory
List the basic elements of a valid contract.
- Legally competent parties
- Offer and acceptance (aka meeting of the minds, aka mutual assent) - means that something is being offered by one party and accepted without qualification by the other
- Consideration - the payment or promise of something of value in exchange for what has been offered
- Legal purpose (or legality of object) - the contract is not for an illegal purpose
- Reality of consent - both parties acted under their own free will, without duress
A common law statute that has been specifically adopted by many states and requires contracts for the sale or transfer of interest in real estate or real estate rentals for more than one year to be in writing in order to be enforceable in court
Statute of frauds
Which law defines and covers the legal force of electronic signatures in interstate and international commerce?
Electronic Signatures in Global and National Commerce Act (ESIGN) - 2000
A legally unsupportable violation of any of the contract terms by either party
Breach of contract
Type of remedy for a breach of contract - cancellation and return of deposits
Contract rescission
Type of remedy for a breach of contract - judicial remedy that requires getting a court order for the party who breached the contract to honor it
Specific performance
Type of remedy for a breach of contract - getting a court-ordered payment of financial restitution
Monetary damages
Type of remedy for a breach of contract - a non-judicial remedy that means getting whatever any liquidated damages provision, default provision, or forfeiture clause in the contract stipulates, such as the forfeiture of earnest money in the case of buyer default
Liquidated damages
Who is the “er”/”or” and who is the “ee”? Specifically comment on mortgages, since that is confusing.
ER/OR –> the party offering something
EE –> the party receiving something
MortgagOR - the owner of property that is being put up as collateral for a loan
MortgagEE - the one who finances the loan
This word means that a person is legally able to transfer their rights in a property
Assignment
Substituting one party to a contract for another, thus releasing the first party from further obligation while shifting that obligation to the new party alone
Novation
A contract that engages a real estate licensee’s firm to market a property in exchange for receiving compensation upon the sale and transfer of the property
Listing contract (aka listing agreement)
What additional components are required to create a valid listing agreement?
- Required signatures (all owners and the listing licensee)
- Property description sufficient to identify the property
- List price
- Definite termination date
- Broker compensation
Who is the final authority for establishing a list price?
Seller
Type of listing agreement - engages a single licensee to market the property and entitles that licensee to a commission regardless of who finds the buyer, even if it is the property owner
Exclusive right to sell
Type of listing agreement - engages a single licensee to market the property and entitles that licensee to a commission if anyone other than the property owner finds the buyer; if the owner finds the buyer, the licensee gets no commission
Exclusive agency
Type of listing agreement - allows the property owner to engage any number of licensees to market the property, only entitles the licensee who procures the buyer to a commission
Open (or nonexclusive)
Type of listing agreement - engages a licensee to market a property and receive as compensation all sale proceeds in excess of the owner’s stated “net” for the property
Net
A contract that engages a real estate licensee to search for suitable property on behalf of a potential buyer in exchange for receiving compensation upon the purchase and transfer of the property
Buyer-broker agreement (aka buyer agency agreement, aka agency employment contact)
Type of buyer agency agreement - engages a single licensee to search for a suitable property and entitles that licensee to compensation regardless of who finds the property, even if it is the buyer
Exclusive buyer agency
Type of buyer agency agreement - engages a single licensee to search for a suitable property and entitles that licensee to a compensation if anyone other than the buyer finds a suitable property
Exclusive-agency buyer agency
Type of buyer agency agreement - allows the buyer to engage any number of licensees to search for a suitable property and only entitles the licensee who introduces the buyer to the purchased property to compensation; if the buyer finds the property, none of the licensees are entitled to any compensation
Open buyer agency (nonexclusive)
The purpose of an ___ is to set forth the conditions the prospective buyer proposes to the seller. It is not a contract.
Offer
A ___ is the common term for the offer if the offeree makes a change of any kind to it and returns it to the original offeror.
Counteroffer
The term for the deposit that accompanies an offer to purchase real estate and serves to demonstrate the buyer’s good-faith intention to complete the transaction and supply the full purchase price at closing.
Earnest money
Once an offer or counteroffer has become a mutually accepted and binding contract, it is variously known as ___.
Purchase agreement Purchase contract Sales contract Purchase and sale contract Agreement for sale
What is generally the final element needed for creating a valid real estate purchase agreement?
Offer and acceptance
During the executory period of contract fulfillment, the buyer has a property interest, specifically the right to acquire formal legal title, which in turn may allow the buyer to transfer or assign that right
Equitable title
___ means that the buyer may transfer their rights in a property
Assignment
Contract ___ refer to the particular information, conditions, and instructions provided in the contract that govern the many details that have to be addressed.
Provisions
How is ownership of personal property legally transferred at closing?
Bill of sale
This clause underlines and reinforces the importance of meeting contract dates and that failure to do so will be considered a contract breach and grounds for cancellation of the contract
Time is of the essence clause
This clause allows one of the parties to rescind (or cancel) the contract without penalty
Rescission
___ serves to hold an offer open for a specified period in exchange for some monetary consideration, which is generally applied toward the purchase price if all conditions are met and the sale goes through or kept by the owner if there is no sale
Option (it is a unilateral contract which is binding on the seller to sell but not the buyer to buy)
True or false - “as is” provisions do not protect a seller from liability for known material defects
True
What does “subject to” a mortgage refer to?
Seller retains the mortgage and liability for payments, but the new owner would pay the mortgage payments
___ detail who pays for what, such as tax prorations, property repairs, title insurance, and other transaction expenses.
Settlement or closing instructions
A special condition or provision inserted by either party that must be met in order for an approved offer to become a fully binding contract; if it is not satisfied, the contract is considered void
Contingency
Common contingency that asserts that the contract is contingent on the buyer’s being approved for a certain type of loan by a particular date
Financing
Common contingency that asserts that a buyer’s current property must be sold prior to the target closing date for the new property
Property sale
Common contingency that asserts that a professional home inspection report must show that the true condition of the property is acceptable to the buyer
Property inspection
Leasehold estates are contracts and are thus classified as what type of property?
Personal
