Real Estate Contracts Flashcards
contract
a voluntary agreement between legally competent parties to perform or refrain from performing some legal act
what are the four essential elements of a valid contract?
- competent parties
- offer and acceptance
- consideration
- legality of object
competent parties
18 years old or under 18 if married
offer and acceptance
there must be meeting of the minds on each term of the contract
aka mutual assent
consideration
what the parties promise in the agreement to give or receive from each other (legal tender, exchange of value, love, etc.)
legality of object
contract must not involve a purpose that is illegal or against public policy
parol evidence rule
written contracts take precedence over oral contracts
amendment
a change used by the signing parties to correct/clarify something in the original contract
what are common amendments made in real estate contracts?
- closing date
- sales price
- extending term of agreement
addendum
a document that alters the terms of the original contract
changing the contract rather than clarifying (amendment)
what are common addenda in real estate contracts?
- inspections
- HOA documents
- disclosures
- updates to terms
Statute of Frauds
states that a contract for the sale of real estate must be in writing and signed in order to be enforceable
exception for statute of frauds
oral contracts can be enforced with “clear and convincing evidence” that buyer and seller agreed orally on the exact real estate to be transferred
express contract
parties state the terms and show their intentions in words
may be oral or written
implied contract
agreement between parties is demonstrated by their acts and conduct
bilateral contracts
both parties promise to do something
unilateral contract
one party makes a promise to induce a second party to do something
are real estate contracts bilateral or unilateral contracts?
bilateral because the seller promises to sell a parcel of real estate and deliver title to the property to the buyer
what is an example of a unilateral contract in real estate?
buyer pays a fee to the seller for the promise to convey title in a certain time frame.
buyer is not obligated to buy if timeline is not met
executed contract
contract in which both parties have fulfilled their promises and therefore performed the contract
executory contract
a contract that exists when something remains to be done by one or both parties
valid contract
contract that contains all essential elements and is binding on and enforceable by both parties
void contract
contract that has no legal force because it does not meet the essential elements of a contract
voidable contract
a contract that seems valid on the surface but may be rescinded by one of the parties
EX: contract entered into with a minor
unenforceable contract
a contract that seems to be valid on the surface, but neither party can successfully sue the other to force performance.
“valid between parties” if they desire to go through
what is an example of an unenforceable contract?
If someone gets drunk and signs a contract to buy a house, they can sober up and either go through with the contract (valid between the parties) or back out because he was not competent and it cannot be enforced.
Contract signed by a person___________ are voidable
under duress or undue influence
time is of the essence
contract must be performed within the time limit specified, and any party who performs not on time is guilty of breach of contract.
time limit is not enforced if this is not stated in contract
assignment
a transfer of rights and/or duties under a contract
novation
substitution of a new contract for an existing agreement
old contract can no longer be enforced
what are possible reasons a contract may be discharged?
- partial performance
- substantial performance
- impossibility of performance
- mutual agreement
- operation of law
breach of contract
violation of any of hte terms/conditions of a contract without legal excuse
specific performance
a legal remedy seeking to force the other party to perform the actions they specifically promised to do in the contract
if the seller defaults, what options does the buyer have?
- rescind the contract and recover earnest money deposit
- file a court suit for specific performance
- sue the seller for compensatory damages
if the buyer defaults, what can the seller do?
- declare the contract forfeited
- rescind the contract and return all payments made by the buyer
- sue for specific performance, offer valid deed to buyer to show compliance
- sue for compensatory damages
statute of limitations
a specific time limit during which parties to a contract may bring legal suit to enforce their rights
in NJ, it is six years
buyer of residential property constructed before 1978 must be offered________
a 10 day opportunity to conduct a lead-based paint survey of the property, and the right to void the contract is hazardous paint is found
what three problems arise when using printed forms in contracts?
- what to write int he blanks
- can draw lines through unwanted words
- additional clauses to be added
how can realtors avoid the problems of printed forms?
type every change and addition to contracts and have parties initial these typed changes
buyer brokerage agreement
contracts that establish the rights of the broker as agent and the buyer as principal
what are different types of real estate sales contracts?
- offer to purchase
- contract of purchase and sale
- earnest money agreement
- binder and deposit receipt
counteroffer
a new offer made as a reply to an offer received
invalidates prior offer
earnest money
a good faith deposit which gives evidence of the buyer’s intention to carry out the terms of their contract
not required
contingency
a clause in a purchase agreement specifying an action or requirement that must be met for the contract to become legally binding
escape clause
a clause in a purchase contract that allows one party to withdraw under certain circumstances
liquidated damages
an amount of money, agreed to in advance by buyer and seller that serves as compensation if one party does not live up to the contract
plain language requirement
NJ law states certain written agreements for sale/lease of residential property be written in clear and coherent manner with common words
rescission period
period of time a party has to rescind the contract after it has been signed
for planned unit developments = 7 days
one to four family dwelling = 3 days
option
a contract by which an optioner (owner) gives an optionee (prospective buyer) the right to buy or lease the owner’s property as a fixed price within a stated period of time
land contract
a sales/financing agreement under which a buyer purchases a seller’s real estate over time and receives deed when contract is executed
equitable title
A beneficial interest in real property that gives the title holder the right to acquire legal title to the property
compensatory damages
damages awarded by a court equivalent to the loss a party suffered
sales contract
contract that sets forth all details of agreement between buyer and seller
