Types of Contracts

Question 1

Two types of contracts:

Answer 1

express or implied

Question 2

express

Answer 2

written or stated

Question 3

implied

Answer 3

actions or evidence

Question 4

Contracts can be:

Answer 4

unilateral/bilateral
unilateral - binds only one party….If then contract
bilateral - binds both parties - exchange of promises

Question 5

Example of unilateral contract

Answer 5

Option

Question 6

Option Contract

Answer 6

Option to purchase within a definite time period at a definite price

Question 7

Option exercised-

Answer 7

contract becomes bilateral

Question 8

Bilateral contract

Answer 8

exchange of promises, which bind both parties

Question 9

Required elements of a contract:

Answer 9

Competent Parties - sane, sober consenting adults
Offer Acceptance - mutual agreement or consent w/o qualifications
Legal Purpose - legality of object
In writing - Statute of Frauds
Consideration - something of value (payment or promise) in exchange for what is being offered

Question 10

Is a contract valid w/o being in writing

Answer 10

Yes, but not enforceable

Question 11

Executed vs executory

Answer 11

Executed/fully executed - all terms/conditions have been met & carried out.

Question 12

Executory

Answer 12

contract signed but not carried out

Question 13

Valid/void

Answer 13

Valid -meet the requirements without in writing
Void/invalid - no binding effect on the parties who made it - (documented insane)

Question 14

Voidable/unenforceable

Answer 14

one party has the right to withdraw (a minor, someone who signed under duress, or under the influence of alcohol or drugs, and injured party)

Question 15

unenforceable

Answer 15

absent of statue of frauds

Question 16

Termination, rescission, & breach of contract -

Answer 16

contract can be terminated for any of several reasons, including bankruptcy or foreclosure

Question 17

mutual rescission

Answer 17

parties agree to cancellation, the contract is terminated

Question 18

default

Answer 18

non-performance of a duty under a contract

Question 19

Liquidated damages

Answer 19

money damages set out in the contract

Question 20

Punitive damages

Answer 20

punish the defaulting party

Question 21

compensatory damages

Answer 21

set to cover the actual injury or economic loss

Question 22

Sellers Options if Buyer Default:

Answer 22

keep earnest money
Hold other party to his duties through a suit of performance - ask the court to force the buyer to buy the property
sue for money damages - money damages are both actual/compensatory and punitive
decide on mutual rescission - release the buyer

Question 23

Buyer options if the seller default:

Answer 23

mutual rescission and recover the earnest money
hold the other party to his duties through specific performance - ask court to force the seller to sell
Sue for money damages

Question 24

All contracts that relate to the transfer of any interest in real estate must be

Answer 24

in writing to be forceable

Question 25

Time is of essence

Answer 25

clause in contract that allows each party to hold other to strict performance by the date specified

Question 26

Contract

Answer 26

becomes voidable at the option of the other party

Question 27

Offer

Answer 27

properly completed form with a price less than, equal to, or more than the seller's asking price & signed by the buyer

Question 28

Purchase Agreement

Answer 28

offer may be called purchase agmt

Question 29

counteroffer

Answer 29

actually a rejection of the offer presentation of a new offer

Question 30

Earnest Money

Answer 30

isn't necessary in a sales contract, it is not consideration

Question 31

Real estate sales contract Earnest Money

Answer 31

will be the liquidated damages if the buyer defaults

Question 32

contingency

Answer 32

a condition that hasn't been met

Question 33

installment Sale

Answer 33

is not the same as an installment contract

Question 34

installment sale

Answer 34

is one where the sales price is paid in installments,

Question 35

Principal-Agent relationship

Answer 35

is a fiduciary relationship

Question 36

Common Law of Agency

Answer 36

governs the relationship between broker and his principal.

Question 37

principal

Answer 37

is often referred to as the client

Question 38

as licensees in agency relationships

Answer 38

must treat all parties with honesty and fairness

Question 39

Two levels of responsibility

Answer 39

Public - honesty, integrity, fairness, disclosure of material facts, and accounting of funds held. Agent does not support or defend a customer's interest Fiduciary responsibility - put the interest of your client first, give full disclosure to your client

Question 40

Ratification

Answer 40

occurs when a principal accepts actions that were not authorized by the agent agreement

Question 41

Level of Agency:

Answer 41

Universal - represent client in all matters both business and personal General - gives the agent power to bind his principal in a particular trade or business. (is the power to sign a legally binding agreement in the name of your principal) Limited power of attorney can be used to create general agency (Owner - Property Manager) (Broker - Sales Agent) Special or limited agency gives the agent the power to perform only specific acts and no others.

Question 42

Duties of the Parties In an agency relationship

Answer 42

CRIP Compensation - pay the commission when earned Reimbursement - repay approved expenses Indemnification - defend the agent when the agent acts on the client's instruction Performance - comply with the written agreement

Question 43

An agent's duties to his principal

Answer 43

OLD CAR Obedience - adhere to given instructions Loyalty - (considered the agent's primary or most important duty) place your client's best interest first Disclosure - reveal all known facts, give non-legal advice and opinions Confidentiality - protect the private information of your client Accounting - handle funds with care. (easiest duty of a dual agent Reasonable Care - protect the property and legal interest of your client

Question 44

Negligence

Answer 44

is carelessness

Question 45

Agency coupled with an interest

Answer 45

agent is also the seller or the buyer

Question 46

contract for deed

Answer 46

buyer - vendee seller - vendor