Prins Flashcards
Contracts for the sale of real estate and leases of more than one year
Must be in writing to be enforceable
Parol evidence rule
Written contracts take precedence over oral agreements.
If there is evidence in writing (such as a signed contract) the terms of the contract cannot be altered by evidence of oral (parol) agreements purporting to change, explain or contradict the written document.
Contracts can be terminated or discharged by
+ Agreement of the parties
+ Performance of the contract
+ Impossibility of performance
+ Operation of law
Release of contract
To give up a right as releasing one from their obligation to perform under a contract, or to relinquish a right to an interest in real property, or
To give freedom, as letting out of prison, or
The writing that grants a release.
Assignment
The act of transferring an interest in property or some right (such as contract benefits) to another. It is used commonly by lawyers, accountants, business people, title companies and others dealing with property.
Novation
Agreement of parties to a contract to substitute a new contract for the old one. It extinguishes (cancels) the old agreement. A novation is often used when the parties find that payments or performance cannot be made under the terms of the original agreement, or the debtor will be forced to default or go into bankruptcy unless the debt is restricted. While voluntary, a novation is often the only way any funds can be paid.
A new contract is created which terminates the original agreement and absolves the original party from liability.
Executed
To finish, complete or perform as required, as in fulfilling one’s obligations under a contract or a court order.
To sign and otherwise complete a document, such as acknowledging the signature if required to make the document valid.
Time is of Essence clause
A phrase often used in contracts which in effect says: the specified time and dates in this agreement are vital and thus mandatory, and “we mean it”. Therefore any delay-reasonable or not, slight or not-will be grounds for canceling the agreement.
Impossibility of Performance
If a law changed after the contact was arranged but before the full performance of the contract.
The application of law may change the rights and liabilities of the parties, without their consent. Contracts can be terminated by OPERATION OF LAW under
Bankruptcy
Statute of Limitations
Alteration of contract
Restatement Second, section 20
No contract arises unless both parties have the same meaning in mind. === Peerless
Unilateral agreement
I NOT necessary in creating a valid contract that would be binding and enforceable on all parties.
In Writing
Contracts for the sale of real estate must be ___ _______
in order to be enforceable.
Novation
If the parties to a contact agree to substitute a new contract for the old one, this is called _____.
Unilateral Recission
Which of these is NOT listed as a way that a contract can be terminated?
Performance of the contract
Agreement of the parties
Impossibility of performance
Default - Breach of Contract
Failing to perform any term of a contract, written or oral, without a legitimate legal excuse. This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which shows the party will not complete the work (anticipatory breach).
Breach of contract is one of the most common causes of law suites for damages and/or court-ordered “specific performance” of the contract.
Unilateral agreement
I NOT necessary in creating a valid contract that would be binding and enforceable on all parties.
In Writing
Contracts for the sale of real estate must be ___ _______
in order to be enforceable.
Reformation
The correction or change of an existing document by court order upon petition of one of the parties to the document.
Reformation will be ordered if there is proof that the parties did not intend the language as written or there was an omission due to mistake or misunderstanding.
Quite often a party petitions for reformation when one or both parties realize the effect of the document as written is different from what was expected but it has already been recorded or filed with a governmental agency.
This may have even occurred from a clerical error.
Unilateral Recission
Which of these is NOT listed as a way that a contract can be terminated?
Performance of the contract
Agreement of the parties
Impossibility of performance
Default - Breach of Contract
Failing to perform any term of a contract, written or oral, without a legitimate legal excuse. This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different
A breach of contact does not relieve the obligations of the breaching party. The non-defaulting party has legal recourses which may be obtained by filing suite in a court of law. These remedies would include:
Rescission Reformation Injunction Specific performance Compensatory damages Consequential damages Attorney fees and costs Liquidated damages Punitive damages
Consequential Damages
Damages claimed and/or awarded in a lawsuit which were caused as a direct foreseeable result of wrongdoing.
Foreseeable means that each side should have reasonably known at the time of the contract that there would be potential losses in the event of a breach.
Reformation
The correction or change of an existing document by court order upon petition of one of the parties to the document.
Reformation will be ordered if there is proof that the parties did not intend the language as written or there was an omission due to mistake or misunderstanding.
Quite often a party petitions for reformation when one or both parties realize the effect of the document as written is different from what was expected but it has already been recorded or filed with a governmental agency.
This may have even occurred from a clerical erri
Injunction
A writ (order) issued by a court ordering someone to do something or prohibiting some act after a court hearing.
Specific Performance
The right of a party to a contract to demand that the defendant (the party who it is claimed breach the contract) be ordered in the judgment to perform the contract.
May be ordered instead of (or in addition to) a judgment for money if the contract can still be performed and money cannot sufficiently reward the plaintiff.
Example - when a defendant was to sell a property and did not, a judge may order the defendant to actually complete the sale.
Specific Performance is the opposite of Rescission.
Compensatory Damages
Damages recovered in payment for actual injury or economic loss, which does not include punitive damages (as added damages due to malicious or grossly negligent action.
The court will award the actual amount of money lost by the aggrieved party.
Consequential Damages
Damages claimed and/or awarded in a lawsuit which were caused as a direct foreseeable result of wrong
Attorney’s fees and costs
are only recoverable if they are expressly provided for in the contract.
The would have had to have been specifically stated as a remedy in the event of a breach.
Real Estate Contracts
Every time you appraise a property that is under contract, it is imperative that you analyze that agreement of sale. Standards Rule 1-5(a) in 2012-2013 USPAP, on page U-20
When the value of opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business:
(a) analyze all agreements of sale, options, and listing of the subject property current as of the effective date of the appraisal.
Punitive Damages
Damages awarded in a lawsuit as a punishment and example to others for malicious, evil or particularly fraudulent acts.
Punitive damages are not recoverable for breach of contract, even if the breach was willful.
Earnest Money
Something of value given by a buyer to a seller to bind a bargain.
If a seller defaults, a BUYER may
+ Rescind the contract and recover the earnest money deposit
+ File a suite calling for specific performance, to force the seller to sell the property
+ Sue the seller for compensatory damages
If a buyer defaults, a SELLER may
+ Declare the contract FORFEITED. The right to forfeit is usually provided in the terms of the contract and the seller generally is entitled to retain the earnest money and any payments received from the buyer.
+ Rescind the contract
+ Sue for specific performance (this may require the seller to offer a valid deed to show READINESS TO PERFORM)
+ Sue for COMPENSATIORY DAMAGES
Real Estate Contracts
Every time you appraise a property that is under contract, it is imperative that you analysze
Some things contained in a Real Estate contract…
The sale price Date of sale Sales concessions Owner of record Legal description Personal property
Effective Date of Value
To estimate the value of the property as of a certain date.
Sales Concessions
+ Paying closing costs
+ Buying down the interest rate of the purchaser’s mortgage
+ Offering private financing at a favorable rate
+ Making repairs
+ Offering rebates
Uniform Residential Appraisal Report (URAR)
1004 Single Family
1073 Condo
Lease
A contract in which the rights to use and occupy land or structures are transferred by the owner to another for a specified period of time in return for a specified rent.
A contract arrangement in which rights of use and possession are conveyed from a property’s title owner (called landlord or lessor) in return for a promise by another (called a tenant or lessee) to pay rents as prescribed by the lease. In practice, the rights and the duties of the parties can be complex, and are dependent upon the specified terms of their contract.
Flat Rental Lease
A lease with a specific level of rent that continues throughout the lease term.
Gross Lease
A lease in which the landlord received stipulated rent and is obligated to pay all of the property’s operating and fixed expenses; also called full-service lease.
Net Lease
A lease in which the landlord passes on all expenses to the tenant.
Graduated Rental Lease (Step-up or Step-down leases)
A lease that provides for specified changes in rent at one or more points during the lease term.
Lease III
It is more important and necessary steps in appraising income-producing property. You must understand the nature of the economic framework under which the property is operating and make reasonable assumptions about future performance.
Revaluation Lease
A lease that provides for periodic rent adjustments based on the market rental rate of the space.
Escalator Lease
A lease that requires the lessor to pay expenses for the first year and the lessee to pay any necessary increases in expenses as additional rent over the subsequent years of the lease.
Overage Rent
The percentage rent paid over and above the guaranteed minimum rent or base rent; calculated as percentage of sales in excess of a specified breakpoint sales volume.
Data found on typical lease:
Date Legal description Name of lessor (landlord) Name of lessee (tenant) Lease term Occupancy date Rent amount - plus any percentage clause, graduation or escalation provisions Payment terms Rent concessions Covenants Right of assignment or right to sublease
Lease III
It is more important and necessary steps in appraising income-producing property. You must understand the nature of the economic framework under which the property is operating and make reasonable assumptions about future
Acceptance may occur as
Either an express act or an implied act.
A real estate contract is an
Bilateral agreement
