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CLI Prelicensing > Unit 11 > Flashcards

Unit 11 Flashcards

1
Q

Contract

A

a voluntary agreement or promise between legally competent parties, supposed by legal consideration, to perform (or refrain from performing) some legal act.

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2
Q

A contract must be…

A
  1. Voluntary
  2. An agreement or a promise
  3. Made by legally competent parties
  4. Supported by lawful consideration
  5. For a legal act
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3
Q

What things establish legal competency?

A
  1. sound mind

2. legal age

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4
Q

What does Lawful Consideration mean?

A

everyone entering into the contract believes that something in the contract has value

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5
Q

Contract Law

A

the area of law that governs such agreements

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6
Q

What types of contracts are there?

A
  1. express

2. implied

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7
Q

Express contract

A

created by oral or written words

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8
Q

Implied contract

A

agreement of the parties is demonstrated by their acts and conduct

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9
Q

Statute of Frauds

A

state law requiring certain contracts be in writing

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10
Q

Bilateral contracts

A

both parties promise to do something; one promise is given in exchange for another

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11
Q

Unilateral contract

A

a one sided agreement where only one party makes a promise in order to entice a second party to do something

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12
Q

Option contract

A

unilateral contract in TN (example)

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13
Q

Executed contract

A

everything that needs to be done in the contract for it to close has been done so it will be closed

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14
Q

Executory (pending) contract

A

contract in the process of getting closed and can’t be closed because there are things that haven’t been done yet

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15
Q

Elements of a contract

A
  1. offer and acceptance
  2. consideration
  3. legally competent parties
  4. consent
  5. legal purpose
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16
Q

Offer and acceptance

A

the sales contract sets out the offer by the buyer (offeror) that is accepted by the seller (offeree)

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17
Q

What is another name for offer and acceptance?

A

mutual assent

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18
Q

Can you back out of a contract at any time?

A

yes

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19
Q

Consideration

A

every contract must be based on something of value (typically money)

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20
Q

2 kinds of consideration

A
  1. good

2. valuable

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21
Q

Valuable considerations

A

something tangible

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22
Q

Good consideration

A

something intangible

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23
Q

Offer

A

a promise made by one party requesting something in exchange for that promise

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24
Q

Acceptance

A

a promise made by the offeree to be bound by teh exact terms proposed by teh offeror

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25
Q

Terminated

A

if the offeree fails to accept it before expiratiaon of the time stated in the offer or by the offeree’s outright rejection of it

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26
Q

Realtiy of Consent

A

entering into contract freely and voluntarily by each party

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27
Q

What you deprive someone of being able to give consent?

A

mistake, misrepresentation, fraud, undue influence, duress

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28
Q

Legal purpose

A

must be for a legal purpose and is otherwise a void contract (unenforcable by law)

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29
Q

Legal competency

A

all parties must be of sound mind and of legal age

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30
Q

If someone is not legally competant to sign a contract, what is the contract considered?

A

voidable at the option of the person who lacks competency?

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31
Q

When is a contract discharged?

A

when the agreement is terminated

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32
Q

Counteroffer

A

a changed offer; a new offer rejecting the original offer

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33
Q

Revocation

A

offeror revokes the offer at any time before acceptance

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34
Q

Letter of intent

A

used to indicate the interest of a prospective buyer or lessee and, if that interest is reciprocated by the porperty owner, to begin negotiations

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35
Q

Valid contract

A

meets all the essential elements that make it legally sufficient, or enforceable, and is binding in a court of law

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36
Q

Void contract

A

has no legal force or effect because it lacks some or all of the essential elements of a contract

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37
Q

Voidable contract

A

appears on the surface to be valid but it may be rescided or disaffirmed by one or both parties based on some legal people; considered to be valid if the party who has the option to disaffirm the agreement does not do so within a certain period of time

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38
Q

What does breach mean

A

violation

39
Q

Enforceable contract

A

all the elements of a valid contract, including the compliance with any applicable statue of frauds or other law that requires it to be in writing and signed by the parties

40
Q

Unenforceable contract

A

appears on the surface to be valid but neither party can sue the other to force performance

41
Q

valid as between the parties

A

once the agreement is fully executed by the transfer of the deed and purchase price, satisfying both parties, netiher has reason to initiate a lawsuit to force performance

42
Q

Assignment

A

one contract going to another party

43
Q

Breach of contract

A

a violation of any of the terms or conditions of a contract

44
Q

Novation

A

substitution of a new contract for an existing contract

45
Q

“time is of the essence”

A

each of the elements of the contract must be performed within the specified time

46
Q

Suit for Specific Performance

A

buyer demands seller to specifically perform and sell them the property as they agreed to in the contract; must be within a certain period of time

47
Q

Statute of limitations

A

limits the time during which parties to a contract may bring legal action or lawsuit to enforce their rights

48
Q

Reasons for termination of a contract

A
  1. Breach of Contract
  2. Partial performance of the terms along with a written acceptance
  3. Substantial performance
    4.
49
Q

Reasons for termination of a contract

A
  1. Breach of Contract
  2. Partial performance of the terms along with a written acceptance
  3. Substantial performance
  4. Impossibility of performance
  5. mutual agreement
  6. operation of law
50
Q

Impossibility of performance

A

an unforeseeable circumstance has made an act required by the contract impossible or impracticable

51
Q

Mutual agreement

A

both parties agree to cancel the contract

52
Q

Operation of law

A

voiding contract by minor, fraud, contract was altered without the written consent of all parties involved

53
Q

Rescission

A

returns the parties to their original positions before the contract, so any monies or properties exchanged must be returned

54
Q

Contracts used in real estate

A
  1. client representation agreements
  2. real estate sales contracts
  3. options
  4. escrow agreements
  5. property maagement agreements
  6. leases
  7. owner financing contracts
55
Q

Contracts used in real estate

A
  1. client representation agreements
  2. real estate sales contracts
  3. options
  4. escrow agreements
  5. property maagement agreements
  6. leases
  7. owner financing contracts
56
Q

Principles

A

reimbursing some of the money the lender borrowed

57
Q

Rears

A

at the end of the period

58
Q

Sales contract

A

contains the complete agreement between a buyer of a parcel of real estate and its seller

59
Q

What does a sales contract start with?

A

an offer

60
Q

What are the essential elements of a sales contract?

A
  1. sales price and terms
  2. adequent description of the property and improvements
  3. statement of the kind and condition of the titel and the form of deed to be delivered by the seller
  4. the kind of title evidence required, who will provide it, and how many defects in the title will be eliminated
  5. a statement of all the terms of the agreement between the parties, including any contingencies
61
Q

Is a counteroffer a rejection of the original offer?

A

yes

62
Q

Binder

A

letter of intent; abbreviated version of a contract

63
Q

Notice of acceptance

A

must notify the buyer that the contract was accepted

64
Q

Earnest money

A

provided deposit when making an offer to purchase real estate; not required by law but is customary

65
Q

What is the amount of earnest money sufficient to?

A
  1. discourage the buyer from defaulting
  2. compensate the seller for taking the property off the market
  3. cover any expenses the seller might incur if the buyer defaults
66
Q

Why give earnest money?

A
  1. Protects from buyers remorse; keeps buyer from wanting to back out
  2. Shows good faith
67
Q

What does earnest money go towards?

A

offset closing price

68
Q

Equitable title

A

when the buyer acquires an interest in the land

69
Q

Equitable title

A

when the buyer acquires an interest in the land; buyer gets a present right to get legal title at some point in the future (day of closing)

70
Q

Destruction of premises

A

varies by state, but once the sales contract is signed by both parties, the buyer or seller assumes the risk of any damage done to the property that may be done before closing the contract

71
Q

Liquidated damages

A

in the event that one party breaches a contract, the parties agree upon an amount of money that will compensate the nonbreaching money

72
Q

If there are contingencies in the contract, the contractis considered?

A

executory

73
Q

Most common contingencies

A
  1. mortgage contingency
  2. inspection contingency
  3. property sale contingency:
  4. lienholder approval
74
Q

Mortgage contingency

A

protects the buyer’s earnest money in the event that they are unable to secure a mortgage on the property

75
Q

Inspection contingency

A

provides that the buyer may obtain certain spections of the property and may cancel the contract if the inspections indicate an unsatisfactory or unsafe property condition

76
Q

Property sale contency

A

protects the buyer who has to sell a home in order to buy the seller’s property

77
Q

Lienholder approval

A

if contract is a short sale

78
Q

Elements of a contract contingency clause:

A
  1. action necessarily to satisfy the contingency
  2. time frame within which the action must be performed
  3. party who is responsible for paying any costs involved
79
Q

Escape clause

A

permits the seller to continue to market the property until all the buyers contingencies have been satisfied or removed; only put in if the buyer’s contingency is a property sale

80
Q

Kick out clause

A

TN version of escape clause

81
Q

Contingencies

A

conditions that must be satisfied before a sales contract is fully enforceable

82
Q

Amendment

A

a change or modification to the existing content of a contract

83
Q

Addendums

A

any provision added to an existing contract that may change or be an addition to the content of the original

84
Q

option

A

a contract by which an optionor (generally an owner) gives an optionee (a prospective purchaser or tenet) the right to buy or lease the owner’s property at a fixed price within a certain period of time

85
Q

Land contract

A

does owner financing but does not pass legal title/sign the deed to the buyer; better protects seller

86
Q

Purchase money mortgage

A

buyer receives the title to the property but places security interest on it - the mortgage - in favor of the seller; better protects buyer

87
Q

Other names for land contract

A

contract for deed, installment contract, land sales contract(, articles of agreement for warranty deed, contract for sale, bond for title)

88
Q

What are similarites between land contracts and purchase money mortgages?

A

both owner financing contracts

89
Q

owner financing

A

seller provides credit for all or part of the funds that will allow the buyer to move forward with a transaction

90
Q

What are differences between land contracts and purchase money mortgages?

A

when legal title passes

91
Q

Statute of limitations

A

limits the time during which parties to a contract may bring a legal action, or lawsuit, to enforce their rights

92
Q

What is the minimum amount of earnest money you must attach to an offer?

A

$0

93
Q

who is the optionor, the buyer or the seller?

A

seller

CLI Prelicensing (23 decks)

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