Unit 1 Chapter 17

Question 1

Contract terms

Answer 1

Time is of the essence – if work is not completed within specified time period, contract is breached

Equitable title – interest buyer has in property between acceptance of contract and closing

Parol evidence rule – when parties’ agreement in final written form, no evidence of prior or
contemporaneous negotiations that contradict the written contract can be admitted into court

Question 2

Contract Preparation

Answer 2

Contract must be prepared by party the state determines

Question 3

Contract Contingencies

Answer 3

• Condition that must be met before contract is enforceable
• Contingency statement must be explicit and clear, have expiration date, and expressly require diligence in
  the effort to fulfill the requirement

Question 4

Factors which Interfere with Contract Fulfillment

Answer 4

Negligence – failure to use due diligence in carrying out a duty

Misrepresentation – an innocent or negligent misstatement of a material fact, detrimentally relied upon
by the other party

Fraud—a misrepresentation of a material fact, which is made with knowledge of its falsity, and with intent
to deceive a party who relies on the misrepresentation to his or her detriment and injury

Question 5

Contract enforcement

Answer 5

• Statutes of limitation restrict the time period for which an injured party in a contract has the right to rescind
  or disaffirm the contract
• Statute of frauds requires certain contracts to be in writing to be enforceable

Question 6

Contract termination

Answer 6

Full, partial, or sufficient performance allows contract to be terminated.

Infeasibility – contract cannot be performed

Mutual agreement – all parties agree to terminate

Rescission – act of nullifying contract

Revocation – one party cancels without consent of other party

Abandonment – parties fail to perform contract obligations

Lapse of time – terminates at contract expiration date

Invalidity of contract – contract is void

Operation of law – rights and liabilities of parties may be changed by application of law

Question 7

Discharge

Answer 7

By acts of parties – alteration, release, assignment, novation, accord and satisfaction

By operation of law – bankruptcy, foreclosure, supervening illegality, passage of time, lache, death or
incapacity

Question 8

Breach of contract

Answer 8

Failure to perform according to contract terms

Gives damaged party right to take legal action subject to time limits

Legal remedies for breach – rescission, forfeiture, suit for liquidated damages, suit for compensatory
damages, suit for specific performance

Question 9

Seller breach of contract

Answer 9

• Buyer may cancel and recover earnest money
• Buyer may sue for specific performance
• Buyer may sue for compensatory damages

Question 10

Buyer breach of contract

Answer 10

• Seller may declare contract forfeited
• Seller may rescind contract
• Seller may sue for specific performance
• Seller may sue for compensatory damages