Real Estate Contracts Flashcards
5 Essential Characteristics of A Contract
A contract must be:
1) VOLUNTARY
2) An AGREEMENT or a promise
3) Made by LEGALLY COMPETENT parties
4) Supported by LEGAL CONSIDERATION
5) For a LEGAL ACT
Contract
A voluntary, legally enforceable promise between two competent parties to perform (or not to perform) some legal act in exchange for CONSIDERATION.
**Statute of Frauds
Requirement that certain types of contracts, including sale of real estate, must be in writing and signed by seller to be enforceable in a court of law.
Two Types of Contract
1) EXPRESS: parties state terms or show intentions in written or oral words
2) IMPLIED: agreement of parties is demonstrated by their acts
Contract Classifications
1) BILATERAL: both parties promise to do something; one promise is given in exchange for another
2) UNILATERAL: one party makes a promise to induce a second party to do something, but the second party is not legally obligated to act. Once it does comply, the first party is obligated to keep its promise. A real estate purchase option is an example of a unilateral contract.
**Executed vs. Executory Contracts
Everything is completed in an EXECUTED CONTRACT. The parties have fulfilled their promises and the contract is performed.
An EXECUTORY CONTRACT exists when one or both parties still have some act to perform.
**Validity of Contracts
A contract may be:
1) VALID
2) VOID
3) VOIDABLE
4) UNENFORCEABLE
**5 Essentials of a Valid Contract
1) OFFER AND ACCEPTANCE- OFFEROR makes a promise, requesting something in exchange for that promise. OFFEREE makes a promise to be bound by the exact terms proposed by the OFFEROR.
2) CONSIDERATION- something of legal value offered by one party and accepted by another as an inducement to act or to refrain from some act.
3) LEGALLY COMPETENT PARTIES
4) LEGAL PURPOSE (LEGALITY OF OBJECT)
5) CONSENT
Discharge of Contract
When a contract agreement is terminated. Termination occurs when a contract is completely performed and all terms are fulfilled or for other reasons including due to breach or default.
Assignment
The transfer of rights or duties under contract, generally to a third party (ASSIGNEE)
Novation
The substitution of a new contract in place of the original one.
Breach of Contract
A violation of any of the terms or conditions of a contract without legal reason.
Suit for Specific Performance
Buyer asks the court to force the seller to go through with the sale and convey the property as previously agreed.
