Unit 1 Chapter 15 Flashcards
A contract is
an agreement between two or more parties who, in a “meeting of the minds,” have pledged to perform or refrain from performing some act.
A valid contract is
one that is legally enforceable by virtue of meeting certain requirements of contract law.
Offer vs. contract
An offer is promise by one party provided that the second party does what is requested; a
contract is when the offer is accepted and other party is notified of acceptance.
A counteroffer is
By changing any of the terms of an offer the offeree creates a counteroffer, and the original offer is void. At this
point, the offeree becomes the offeror, and the new offeree gains the right of acceptance.
When an offer or counteroffer is accepted and the seller and/or buyer is notified of the acceptance, the offer
becomes a
valid contract.
The following actions or circumstances can terminate an offer
- Offeree accepts offer
- Offeree rejects offer
- Offeror withdraws offer before acceptance
- Offer expires
- Counteroffer
- Death or insanity of either party
Contract classifications
- Oral vs. written – oral may/may not be valid and enforceable; some contracts are required to be written
- Express – all terms stated and agreed to by all parties
- Implied – unstated, unintentional agreement based on actions of any of the parties
- Bilateral – both parties promise to perform their parts in exchange for other party performing
- Unilateral – only one party promises to do something; second party not obligated to perform
- Executed – fully performed contract
- Executory – performance still to be completed
- Unconscionable – unduly favors party with superior bargaining power; most likely not enforceable
- Adhesion – dictated by party with greater bargaining advantage; may or may not be enforceable
- Aleatory – effects of contract are dependent on chance
Elements of a contract
- Competent parties – legal age, mental competency, legitimate authority (power of attorney).
- Mutual agreement – all parties agree to terms without equivocation without undue influence.
- Lawful objective – content and intent of contract must be lawful.
- Consideration – 2-way exchange of something of value as compensation for performance by other party.
- In Writing – in writing, contain legal description of property, be signed by one or more parties.
- Statute of Fraud – requires contract to be in writing to be enforceable.
Why do a purchase and sale agreement
an offer made without written agreement can be missing terms and can be accepted and become enforceable contract as is.
Elements of purchase and sale agreement
- Same criteria as other contracts.
- Parties to contract – everyone who has ownership interest in the property must sign the contract.
- Community property – both husband and wife must sign.
- Joint tenants or tenants in common – all owners must sign contract if entire property is being sold.
- Business owned – all partners and spouses on contract as well as partnership or corporation name, address, and state where organized or incorporated.
- Estate or trust – executor of estate or trustee must sign.
- Property description – address and legal description of property should be included.
- Price and method of payment – offer price and cash, financing, seller financing, etc.
- Condition of title – seller to provide marketable title with title insurance; no liens or pending legal action.
- Closing date – seller receives proceeds from sale; buyers get deed; all related documents recorded.
- Closing costs – who is responsible for paying which fees.
• Possession – date buyer will take possession of property; should be on closing date to avoid potential
problems.
Purchase and sale agreement terms
- Default – addresses what happens in the case of default and what remedies are available.
- Time is of the Essence – requires terms of the contract to be completed on time.
Rescission Contract
Whatever the reason, when a purchase contract terminates, the parties can sign a rescission contract in which they agree that they are rescinding the contract and they are releasing one another and all others involved in the sale from any present or future liability.
