RP UNIT11 Flashcards
What is a contract?
A voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act.
What is an express contract?
A contract where the parties state the terms and show their intentions in words.
What is an implied contract?
An agreement demonstrated by the acts and conduct of the parties.
What does the statute of frauds require?
Real estate contracts to be in writing.
What distinguishes a bilateral contract?
Both parties promise to do something for the other; it binds all parties.
What is a unilateral contract?
A contract where one party promises to do something to induce a second party to act; binding on only one party.
What is an executed contract?
A contract that has been fully performed.
What is an executory contract?
A contract that requires some performance by one or more parties before it is completed.
What is required for the creation of a valid contract?
Offer and acceptance, consideration, consent, legal purpose, and legally competent parties.
What does ‘time is of the essence’ mean?
The contract must be performed within the stipulated time.
What is assignment in contract terms?
Transfer of rights or duties under a contract, generally to a third party.
What is novation?
Substitution of a new contract for an existing contract.
What is a breach of contract?
Violation of any of the terms or conditions of a contract without legal reason.
What actions can a buyer take if the seller defaults?
- Sue the seller for specific performance
- Sue the seller for damages
What actions can a seller take if the buyer defaults?
- Sue the buyer for the purchase price
- Sue the buyer for damages
What is the statute of limitations?
The time limit in which to enforce rights; varies for different legal actions.
What are some reasons for termination of contracts?
- Partial performance
- Substantial performance
- Impossibility of performance
- Mutual agreement to cancel
- Operation of law
- Rescission
Name some common contracts used in the real estate business.
- Client representation agreements
- Real estate sales contracts
- Options
- Escrow agreements
- Property management agreements
- Leases
- Owner financing contracts
What is a sales contract also known as?
Offer to purchase, contract of purchase and sale, purchase agreement, earnest money agreement, or deposit receipt.
What is a counteroffer?
An offer made in response to another offer, which causes the original offer to cease to exist.
What is a binder in real estate?
A ‘short form’ sales contract used in some areas.
What is an earnest money deposit?
Evidence of the buyer’s intention to carry out the terms of the contract.
What is equitable title?
The buyer’s insurable interest in the property after the contract is created but before the deed is delivered.
What is the purpose of liquidated damages?
To compensate the seller if the buyer breaches the contract, often using the earnest money.
What must be included in the provisions of a sales contract?
- Identification of buyer and seller
- Property description
- Purchase price and financial arrangements
- Closing agent and instructions
- Date for closing
- Title evidence
- Provisions for prorations
- Remedies for breach
- Contingencies
What is a contingency in a contract?
Additional conditions that must be satisfied before a sales contract is fully enforceable.
What is an amendment in contract terms?
A change to existing content of a contract.
What is an addendum?
An additional, new provision to a contract.
What does an option in real estate grant?
The right to buy or lease property at a fixed price within a stated period of time.
What is the significance of owner financing contracts?
The seller retains legal title while the buyer receives possession and equitable title.
