Unit 5: Essential Elements of a Valid Contract Flashcards
What are the 5 essential elements of a valid contract?
1) Competent Parties
2) Meeting of the Minds
3) Lawful Objective
4) Consideration
5) In writing and signed
How is an individual deemed competent?
They are 18 years or older, sane, and sober.
What is a counteroffer?
A response to a contract offer that changes the terms of the original offer.
T/F A counteroffer is a partial acceptance, partial rejection, or partial termination of the contract.
False. A counteroffer is a NOT a partial acceptance, partial rejection, or partial termination of the contract. Rather a counteroffer terminates the original offer and creates a new one.
What are 2 other names for the Offer & Acceptance element of a contract?
1) Mutual Consent
2) Meeting of the Minds
When does a contract become binding?
When there is communication of acceptance.
Can there be fraud or misrepresentation in a valid contract?
No. The parties may not make false statements or omit material facts.
T/F Sellers do not have to disclose all material defects and facts even if selling “as is”.
False. Sellers MUST disclose all material defects and facts even if selling “as is”.
What does the Lawful Objective element mean?
The contract must have a legal purpose.
T/F Earnest money is an example of a consideration.
False. Earnest money is NOT a consideration for a sales contract and therefore is not required.
Earnest money is “good faith $”
What is a consideration?
Consideration is money, promises, or something of value.
What is an addendum?
Additional material attached to and made part of an offer.
Disclosures and contingencies are examples of what part of a contract?
Addendum
What is an amendment?
Modifications of contract terms by mutual agreement.
T/F Amendment may be done verbally between parties.
False. Amendments MUST be in writing and signed by all parties.
