Sales Contracts and Options Flashcards
acceptance
The expression of the intention of the person receiving an offer (offeree, usually the seller) to be bound by the terms of the offer.
addendum
An agreement that adds terms and conditions and incorporates them into the legal document.
assignment
The written transfer of interest in a mortgage, lease, or contract.
breach of contract
Violation of any of the terms or conditions of a contract without legal excuse; default, nonperformance, such as failure to make payment when due.
consideration
An act or forbearance, or the promise thereof, that is offered by one party to induce another to enter into a contract; that which is given in exchange for something from another.
contingency
A provision placed in a contract that requires the completion of a certain act or the happening of a particular event before a contract is binding.
contract
A legal agreement between competent parties who agree to perform or refrain from performing certain acts for a consideration. In real estate, there are many different contracts, including listings, contracts of sale, options, mortgages, assignments, leases, deeds, escrow agreements, and loan commitments, among others.
contract sale
A financial agreement between the contract holder (vendor) and the contract purchaser (vendee) for the purchase of real property.
counteroffer
A new offer made as a reply to an offer received from another; this has the effect of rejecting the original offer, which cannot thereafter be accepted unless reviewed by the offeror’s repeating it.
default
Failure to fulfill a duty or promise or failure to perform any obligation or required act. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money.
deposit
Money offered by a prospective buyer as an indication of good faith in entering into a contract to purchase; earnest money; security for the buyer’s performance of a contract.
duress
Unlawful constraint or action exercised on a person whereby that person is forced to perform some act against his or her will. A contract entered into under _______ is void.
executory contract
A contract in which one or both of the parties has not yet performed.
offer
A promise by one party to act or perform in a specified manner provided the other party will act or perform in the manner requested.
offer and acceptance
The two components of a valid contract; a “meeting of the minds.”
option
An agreement to keep open, over a set period, an offer to sell or purchase property.
rescission
The legal remedy of canceling, terminating, or annulling a contract and restoring the parties to their original positions; a return to the status quo.
specific performance
A legal action brought in a court of equity to compel a party to carry out the terms of a contract.
statute of of frauds
English law requiring that certain contracts be in writing and signed by the party to be charged therewith in order to be legally enforceable.
statute of limitations
Originated from English law (doctrine of laches) pertaining to the period of time within which certain actions must be brought to court in order to be considered enforceable.
time is of the essence
The clause in a contract that emphasizes that punctual performance is an essential requirement of the contract.
unilateral contract
A contract in which one party makes an obligation to perform without receiving in return any express promise of performance from the other party, such as an open listing contract, where the seller agrees to pay a commission to the broker who brings in a ready, willing, and able buyer.
valid
Describes a contract that complies with all the essentials of a contract and is binding and enforceable on all the parties. The required essentials include offer and acceptance, consideration, reality of consent, legal purpose, and legally competent parties.
MISTAKEN IDENTITY
addendum/amendment
Addendums are always added to an agreement, while amendments always amend existing ones.
MISTAKEN IDENTITY
down payment/deposit
A down payment is the amount of cash offered by a buyer – as an indication of good faith in entering into a contract to purchase – or purchaser at the time of purchase. Even though the down payment usually includes the earnest money ‘deposit’, the terms are not synonymous (earnest money is applied toward the total amount of cash down payment due at the closing). If the buyer completes the purchase, the deposit money is applied toward the purchase price.
MISTAKEN IDENTITY
executed/executory
An executory contract is one that still needs to be performed, whereas an executed contract has been completed.
MISTAKEN IDENTITY
option/right of first refusal
An option is a right to purchase property at a set price for a fixed period of time, whereas a right of first refusal is a right to purchase property only if it is offered for sale in the future.
MISTAKEN IDENTITY
optionor/optinee
The optionor is the owner of the property being held for possible sale, whereas the optionee is the potential buyer who has the option to purchase.
MISTAKEN IDENTITY
rescission/restriction
Rescission is the remedy on breach of contract in which the parties return to their respective positions before the contract (return to the status quo), whereas restriction is some limitation placed on the use of some property.
MISTAKEN IDENTITY
statute of frauds/statute of limitations
The statute of frauds requires that certain contracts be in writing to be enforceable, whereas the the statute of limitations sets time limits on the ability to file a lawsuit to enforce a right.
MISTAKEN IDENTITY
unilateral/bilateral
A unilateral contract involves one promise to perform (option contract), whereas a bilateral contract involves mutual promises to perform (as in a sales contract)
MISTAKEN IDENTITY
void/voidable
A void contract lacks the essential elements to be valid, whereas a voidable contract is valid, except one of the parties has the ability to void it because of some wrongdoing.
