Unit 9: Basic Contract Law

Question 1

A rider to a contract with additional terms or conditions.

Answer 1

addendum

Question 2

A change to contractual terms or conditions.

Answer 2

amendment

Question 3

The transfer to another party in writing of rights or interest in a bond, a mortgage, a lease, or another instrument.

Answer 3

assignment

Question 4

A form of selling property where oral bids are taken and the property is sold to the highest bidder.

Answer 4

auction

Question 5

A legally enforceable promise or set of promises between legally competent parties that must be performed for consideration. If a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

Answer 5

bilateral contract

Question 6

The violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due.

Answer 6

breach of contract

Question 7

Money damages awarded to the injured party to compensate them for the breach of contract but not to punish the breaching party.

Answer 7

compensatory damages

Question 8

A defeasible fee simple estate that dictates some action or activity that the new owner must not perform. The former owner retains a right of reentry, so if the condition is broken, the former owner can take repossession of the property.

Answer 8

consequential damages

Question 9

(1) That received by the grantor in exchange for a deed. (2) Something of value that induces a person to enter into a legally enforceable contract.

Answer 9

consideration

Question 10

A legally enforceable promise or set of promises between legally competent parties that must be performed for consideration. If a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

Answer 10

contract

Question 11

A new offer made in response to an offer received. It has the effect of rejecting the original offer.

Answer 11

counteroffer

Question 12

Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.

Answer 12

earnest money deposit

Question 13

A contract in which all parties have fulfilled their promises in the contract.

Answer 13

executed contract

Question 14

A contract under which something remains to be done by one or more of the parties.

Answer 14

executory contract

Question 15

An oral or written contract in which the parties state the contract’s terms and express their intentions in words.

Answer 15

express contract

Question 16

A contract under which the agreement of the parties is demonstrated by their conduct.

Answer 16

implied contract

Question 17

The purpose of a legally enforceable contract cannot be for illegal actions or acts against public policy.

Answer 17

legality of object

Question 18

People who are recognized by law as being able to contract with others; those of legal age and sound mind; a requirement of a legally enforceable contract.

Answer 18

legally competent parties

Question 19

An amount predetermined by the parties to a contract as compensation to an injured party if the other party breaches the contract.

Answer 19

liquidated damages

Question 20

A deliberate agreement between parties; offer and acceptance; “meeting of the minds.” A requirement of a legally enforceable contract.

Answer 20

“meeting of the minds”

Question 21

A deliberate agreement between parties; offer and acceptance; “meeting of the minds.” A requirement of a legally enforceable contract.

Answer 21

mutual assent

Question 22

Substituting a new contract for an old one or substituting new parties to an existing contract.

Answer 22

novation

Question 23

The promise by one party to act or perform in a certain manner if the other party agrees to act or perform as requested; shows an intention to enter into a contract.

Answer 23

offer

Question 24

The person receiving the offer is the offeree.

Answer 24

offeree

Question 25

The person who makes the offer is the offeror.

Answer 25

offeror

Question 26

Two essential components of a valid contract; See mutual assent and acceptance.

Answer 26

offer and acceptance

Question 27

A rule of evidence providing that a written agreement is the final expression of the agreement of the parties, not to be varied or contradicted by prior or contemporaneous oral or written negotiations.

Answer 27

parol evidence rule

Question 28

If misrepresentation, fraud, mistake of fact, undue influence or duress are absent in contract formation, good contract is formed.

Answer 28

reality of consent

Question 29

The legal remedy of canceling, terminating, or annulling a contract and restoring the parties to their original positions. Contracts may be rescinded due to mistake, fraud, or misrepresentation. There is no need to show any money damage.

Answer 29

rescission

Question 30

A legal action to compel a party to carry out the terms of a contract.

Answer 30

specific performance

Question 31

A state law that requires that certain instruments that convey interest in real estate be in writing to be legally enforceable, such as deeds, real estate sales contracts, and certain leases.

Answer 31

statute of frauds

Question 32

That law pertaining to the period of time within which certain actions must be brought to court or be lost.

Answer 32

statute of limitations

Question 33

A phrase in a contract that requires the performance of a certain act no later than a stated time or the noncompliant party is in breach and the contract may be voidable by the opposite party.

Answer 33

time is of the essence

Question 34

A contract that has all the elements of a valid contract, yet neither party can sue the other to force performance of it. For example, a verbal contract is generally unenforceable.

Answer 34

unenforceable contract

Question 35

A one-sided contract wherein one party makes a promise to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.

Answer 35

unilateral contract

Question 36

A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.

Answer 36

valid contract

Question 37

A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties.

Answer 37

voidable contract

Question 38

A contract that has no legal force or effect because it does not meet the essential elements of a contract.

Answer 38

void contract