Unit 5: Classification and Stages of Contracts Flashcards

1
Q

What are the 3 classifications of contracts?

A

1) Valid
2) Void
3) Voidable

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2
Q

What makes a contract valid?

A

The contract meets all the legal requirements, contains all the essential elements, and is binding and enforceable in court by both parties.

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3
Q

What makes a contract void?

A

The contract lacks one or more of the essential elements of a valid contract.

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4
Q

T/F A void contract has no legal effect and is not enforceable in court by either party.

A

True

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5
Q

What makes a contract voidable?

A

The contract appears to be valid, but one party may disaffirm it because the party is a minor or was subject to duress, fraud, or misrepresentation.

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6
Q

What are the stages of a contract?

A

1) Letter of Intent
2) Offer
3) Contract
4) Termination

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7
Q

In what kind of sale do you see letters of intent?

A

Commercial sales

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8
Q

What is the letter of intent?

A

It is a way for the buyer to seek information about a potential transaction but it does not have any legal obligation.

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9
Q

What contract stage is known as the negotiation period?

A

Offer

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10
Q

T/F Offers can continue to be countered after a meeting of the minds.

A

False. Offers may be countered and new offers made UNTIL there is a meeting of the minds.

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11
Q

What is a meeting of the minds?

A

An understanding or mutual agreement between two or more parties and their understanding of that agreement.

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12
Q

T/F In the offer stage, earnest money is not usually deposited because there is not a contract yet.

A

True

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13
Q

When is a contract formed?

A

Upon a meeting of the minds and communication of acceptance by the parties.

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14
Q

How can the terms of a contract be changed?

A

Through an amendment that is signed by all parties.

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15
Q

T/F The original offer still stands even after changes are made.

A

False. Any change to an offer WILL TERMINATE the offer and create a new offer.

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16
Q

When is the earnest money deposited?

A

When the contract has been signed by all parties.

17
Q

How is a lease contract terminated?

A

On expiration date or notice.

18
Q

How is an option contract terminated?

A

On expiration date.

19
Q

How is a purchase contract terminated?

A

Either by a party exercising a contingency and terminating, or at closing with the conveyance of the deed.