Unit 11 - Real Estate Contracts Flashcards
A contract is..
A contract is a voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act.
A _____ is a voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act.
Contract
A contract must be:
Voluntary – no one may be forced into a contract
An agreement or a promise – A contract is a promise of set of promise
Made by legally competent parties – legally capable of making a legally binding contract in the eyes of the law
Supported by legal consideration – A contract must be supported by some valuable thing that induces a party to enter into the contract and that must be legally sufficient to support a contract
About a legal act
According to the Statute of Frauds, a contract must be in ____ in order to be enforceable in a court of law.
writing
______ means that a court can force the parties to comply with the terms of the contract.
Enforceable means that a court can force the parties to comply with the terms of the contract.
What is an express contract
written or verbal
exist when parties state terms and show their interests in words
What is an implied contract
is an agreement based on acts of conduct
What is a bilateral contract?
promise for a promise (both parties agree to do something)
what is an unilateral contract?
one sided agreement
What is an executory contract
one that has elements yet to be performed
What is an executed contract
one of which all terms have been performed
completed
In Colorado, when does an offer terminates
In Colorado, when an offer is made, it must be accepted by the deadline specified or the offer terminates.
How is an offer made?
A offer is made by the offeror and the offeree makes the acceptance.
There must be a meeting of the minds – there must be a complete agreement and understanding between the parties about the purpose and terms of the contract. There must also be the understanding that the parties must have intended to enter into a contract.
If the offeree does not accept the offer, he/she may put forth a counter offer in which the offeree agrees to the terms of the original offer but with the modifications specified in the counter offer. At that point, the other party must decide whether or not to accept the modified terms. If he/she accepts the counteroffer, then the original offer and the counteroffer together become the contract
What standard could a seller be held to if they are held to a specific standard
If the seller doesn’t fullfil their promises, the buyer can sue for specific performance
Elements of a Valid Contract:
Consideration:
Consideration is something of value offered with a contract to show one party’s intention to deliver on their promise to perform under the term of the contract.
In Colorado, consideration is the earnest money which is considered to be “good faith” money. Earnest money amounts differ from area to area but generally it must be at least 1% of the purchase price.
(needs to be sufficient enough to cover some of the damages caused to seller in terms of a default.)
Elements of a Valid Contract:
Reality of Consent:
A contract must be entered into as the free and voluntary act of each party
Each party must be given the opportunity to make a prudent and knowledgeable decision free of undue influence.
Elements of a Valid Contract:
Legal Purpose:
A contract must be formulated to satisfy a legal purpose
Elements of a Valid Contract:
Legally Competent Parties:
Both parties must be 18+ (unless emancipated)
All parties must be legally competent to enter into a contract – able to understand the nature and consequences of their actions in the contract.
Validity of Contracts:
Valid:
Void:
Voidable:
Unenforcable:
Valid: A valid contract meets all the previous requirements.
Void: A contract has not legal force and effect if it lacks some or all of the required elements. In these circumstances, the contract was never a contract in the eyes of the law.
Voidable: A voidable contract is one that appears to be valid but may be rescinded or disaffirmed by one or both parties based on a legal principle.
Unenforceable: A contract that seems to be valid on the surface but neither party can sue the other for performance. An oral real estate agreement is not enforceable but the defaulting party could be sued for damages.
Performance of a Contract:
A contract that must be completed in a specific deadline and within the time/date.
Assignment of a contract:
Is the transfer of rights/duties under a contract
If permitted, a contract may be assigned to a third party (assignee).
What is Novation:
A contract may be performed by novation – the substitution of a new contract in place of the original.
The parties must intend to discharge the old contract.
Both parties must agree to the Novation.
Breach of Contract:
Specific Performance:
If party to a contract defaults on the contract, the other party may sue for specific performance asking the court to force the defaulting party to perform on the contract as previously agreed
In Colorado, the seller is held to a specific performance standard if they default on the contract and the buyer is held to specific performance if that option in the contract has been selected.
Breach of Contract:
Liquidated Damages:
In Colorado, if selected, liquidated damages limits the damages in a buyer default to the seller retaining earning the monies received
What kind of contract forms are used in Colorado?
In Colorado, a licensee must use contract forms that have been approved by the Colorado Real Estate Commission.
