Unit 11 - Real Estate Contracts

Question 1

What is a contract

Answer 1

A voluntary promise between two competent parties to perform (or not perform) some legal act in exchange for consideration

Question 2

What are the 5 things a contract must be

Answer 2

Voluntary, An agreement or a promise, made by legally competent parties, supported by lawful consideration, for a legal act

Question 3

What is an express contract

Answer 3

Parties state the terms and show their intentions in words, either oral or written.

Question 4

What is an Implied contract

Answer 4

agreement of the parties is demonstrated by their acts and conduct

Question 5

What is a bilateral contract

Answer 5

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

Question 6

What is a unilateral contract

Answer 6

A one-sided agreement; one party makes a promise in order to entice a second party to do something. First party (seller) is legally obligated

Question 7

What is an executed contract

Answer 7

one in which all parties have fulfilled their promieses; the contract has been performed

Question 8

What is an Executory contract

Answer 8

when one or both parties still have an act to perform. (a sales contract from time it is signed until closing)

Question 9

What 5 requirements create a valid contract

Answer 9

Offer and acceptance
Consideration
Legally competent parties
Consent
Legal Purpose

Question 10

What is revocation

Answer 10

the offeror revokes the offer before offeree’s acceptance

Question 11

What is Consideration

Answer 11

something of legal value offered by one party and accepted by another. Must be good and valuable between parties

Question 12

A contract can be described in what 4 ways

Answer 12

Valid: has all the legal elements
Void: Lacks one or more elements and has no legal force or effect
Voidable: has all legal elements on its face, but it may be rescinded or
disaffirmed
Unenforceable: appears to ahve all legal elements but cannot be
enforced in court. (Still valid between parties)

Question 13

When is a contract discharged

Answer 13

when the agreement is terminated. Either completely performed/fulfilled, or for another reason, sucha s breach or default.

Question 14

What does “time is of the essence” mean

Answer 14

each element of contract must be performed within a certain time. No specific deadline; should be performed within a reasonable time

Question 15

What is Assignment

Answer 15

refers to a transfer of rights or duties under a contract. Substitution of parties

Question 16

What is a Novation

Answer 16

Substitution of a new contract for an existing contract. (Multiple courteroffers, just create new contract with final offers)

Question 17

What is suite for specific performance

Answer 17

seller breaches real estate sales contract, buyer sues. Ask court to force seller to go through with the sale. May sue for damages for any costs of hardship suffered.

Question 18

What are liquidated damages clause

Answer 18

specifies the amount of money to which the seller is entitled if the buyer breaches the contract. (Usually earnest money)

Question 19

What is partial performance of the terms along with written acceptance

Answer 19

Parties agree work performed is close enough to completion

Question 20

What is substantial performance

Answer 20

one party has substantially performed on the contract but does not complete all the details exactly as the contract requires.

Question 21

What is Impossibility of performance

Answer 21

unforeseen circumstance has made an act requried by the contract impossible or impracticable

Question 22

What is Rescission

Answer 22

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

Question 23

What is a counteroffer

Answer 23

a new offer, it rejects the original offer

Question 24

What is a Binder or Letter of Intent (LOI)

Answer 24

in a complex, usually commerical, transaction, a buyer’s offer my be presented in a shorter document instead of a complete sales contract. (bullet points)

Question 25

What is Earnest Money

Answer 25

a deposit when making an offer, usually in the form of a check. Evidence of the buyer’s intention to carry out the terms of the contract in good faith.

Question 26

What is Commingling

Answer 26

Putting earnest money in a general fund account instead of a specific earnest money account, as stated by law

Question 27

What is Equitable Title

Answer 27

after both buyer and seller have executed a sales contract, however, the buyer acquires an interest in the land

Question 28

What are contingencies

Answer 28

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

Question 29

What are 3 most common contingencies

Answer 29

Mortgage contingency; buyer unable to secure mortgage
Inspection contingency; unsafe or unsatisfactory condition
Property Sale contingency; buyer has to sell his house first

Question 30

What is an escape clause when dealing with contingencies

Answer 30

permits the seller to continue to market the property until all the buyer’s contingencies have been satisfied or removed

Question 31

What is an amendment

Answer 31

changes or modifications to the existing content of a contract

Question 32

What is an addendum

Answer 32

adding a provision to an existing contract

Question 33

What is an Option

Answer 33

a contract when the Optionor (owner) gives an optionee (tenant or potential buyer) the right to buy or lease the owner’s property at a fixed price with a certain period of time. “Right to do something in the future; on something agreed to today” (Only unilateral contract)

Question 34

What is a land contract also known as

Answer 34

contract for deed, contract of sale, bond for title, installment contract, a land sales contract, or articles of agreement for warranty deed.

Question 35

What is a land contract

Answer 35

owner/seller (vendor) retains legal title. Buyer (vendee) takes possession and gets equitable title to the property. Down payment and regular monthly payments. Deed delivered to buyer after terms of contract has been satisfied.