Unit 9 - Basic Contract Law

Question 1

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. All parties to the instrument are legally bound to act as prescribed. May be unilateral, by which only one party is bound to act, or bilateral, by which

Answer 1

Bilateral Contract

Question 2

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

Answer 2

express agreement/contract

Question 3

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

Answer 3

implied agreement/contract

Question 4

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 4

Statute of frauds

Question 5

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 5

unilateral contract

Question 6

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

Answer 6

executory contract

Question 7

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

Answer 7

executed contract

Question 8

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

Answer 8

valid contract

Question 9

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

Answer 9

void contract

Question 10

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

Answer 10

voidable contract

Question 11

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 11

unenforceable contract

Question 12

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 12

legally competent parties

Question 13

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

Answer 13

mutual assent aka deliberate agreement aka “meeting of the minds”

Question 14

Two essential components of a valid contract

Answer 14

offer and acceptance

Question 15

Expression of intent by the offeree to be bound by the terms of the offer; must be in writing if the contract pertains to real property. Must be communicated to the opposite party to create a contract.

Answer 15

acceptance

Question 16

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

Answer 16

legality of object

Question 17

(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 17

consideration

Question 18

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 18

earnest money

Question 19

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

Answer 19

reality of consent

Question 20

1. Minor
2. Fraud
3. Duress
4. Misrepresentation
5. Drugs
6. Person who is known to be mentally ill (not declared by a court)

Answer 20

Voidable contract

Question 21

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 21

offer

Question 22

The person who makes the offer

Answer 22

offeror

Question 23

The person receiving the offer

Answer 23

offeree

Question 24

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

Answer 24

counteroffer

Question 25

1. Mutual assent 2. Consideration 3. Capacity of the parties 4. Lawful objective

Answer 25

Elements of a Contract

Question 26

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 26

parol evidence rule

Question 27

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

Answer 27

"time is of the essence"

Question 28

A change to contractual terms or conditions

Answer 28

amendment

Question 29

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

Answer 29

assignment

Question 30

Substitution of parties

Answer 30

assignment

Question 31

Substitution of new contract

Answer 31

novation

Question 32

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

Answer 32

novation

Question 33

1. Partial performance of the terms of contract 2. Substantial performance 3. Impossibility of performance 4. Mutual agreement of the parties to cancel 5. Operation of law

Answer 33

Discharge of contract

Question 34

One party accepts something less than agreed on as complete performance

Answer 34

Partial performance

Question 35

One party has substantially performed the contract but does not complete all the details exactly as the contract requires

Answer 35

Substantial performance

Question 36

An act required by the contract can not be accomplished

Answer 36

Impossibility of performance

Question 37

Offer discharged due to: 1. Contract by minor 2. Fraud 3. Expiration of statute of limitations 4. Alteration of contract without written consent of all parties 5. Bankruptcy

Answer 37

Operation of law

Question 38

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 38

breach of contract

Question 39

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

Answer 39

compensatory damages

Question 40

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

Answer 40

liquidated damages

Question 41

Award of special damages if the breaching party entered the contract with plans to breach; injured party may sue for lost profits.

Answer 41

consequential damages

Question 42

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

Answer 42

specific performance

Question 43

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

Answer 43

rescission

Question 44

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

Answer 44

statute of limitations

Question 45

A rider to a contract with additional terms or conditions.

Answer 45

addendum aka riders

Question 46

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

Answer 46

auction

Question 47

The seller reserves the right to stop the bidding if it becomes apparent that the high bid will be unacceptable

Answer 47

Auction with reserve

Question 48

The seller agrees to accept the high bid, no matter what the terms of that bid.

Answer 48

Auction without reserve aka absolute action