Unit 9 - Basic Contract Law Flashcards
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
Bilateral Contract
An oral or written contract in which the parties state the contract’s terms and express their intentions in words.
express agreement/contract
A contract under which the agreement of the parties is demonstrated by their conduct.
implied agreement/contract
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.
Statute of frauds
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.
unilateral contract
A contract under which something remains to be done by one or more of the parties.
executory contract
A contract in which all parties have fulfilled their promises in the contract.
executed contract
A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.
valid contract
A contract that has no legal force or effect because it does not meet the essential elements of a contract.
void contract
A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties.
voidable contract
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.
unenforceable contract
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.
legally competent parties
A deliberate agreement between parties; offer and acceptance; “meeting of the minds.” A requirement of a legally enforceable contract.
mutual assent aka deliberate agreement aka “meeting of the minds”
Two essential components of a valid contract
offer and acceptance
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.
acceptance
The purpose of a legally enforceable contract cannot be for illegal actions or acts against public policy
legality of object
(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.
consideration
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.
earnest money
If misrepresentation, fraud, mistake of fact, undue influence or duress are absent in contract formation, good contract is formed.
reality of consent
- Minor
- Fraud
- Duress
- Misrepresentation
- Drugs
- Person who is known to be mentally ill (not declared by a court)
Voidable contract
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.
offer
The person who makes the offer
offeror
The person receiving the offer
offeree
A new offer made in response to an offer received. It has the effect of rejecting the original offer.
counteroffer
- Mutual assent
- Consideration
- Capacity of the parties
- Lawful objective
Elements of a Contract
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.
parol evidence rule
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,
“time is of the essence”
A change to contractual terms or conditions
amendment
The transfer to another party in writing of rights or interest in a bond, a mortgage, a lease, or another instrument.
assignment
Substitution of parties
assignment
Substitution of new contract
novation
Substituting a new contract for an old one or substituting new parties to an existing contract
novation
- Partial performance of the terms of contract
- Substantial performance
- Impossibility of performance
- Mutual agreement of the parties to cancel
- Operation of law
Discharge of contract
One party accepts something less than agreed on as complete performance
Partial performance
One party has substantially performed the contract but does not complete all the details exactly as the contract requires
Substantial performance
An act required by the contract can not be accomplished
Impossibility of performance
Offer discharged due to:
- Contract by minor
- Fraud
- Expiration of statute of limitations
- Alteration of contract without written consent of all parties
- Bankruptcy
Operation of law
The violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due.
breach of contract
Money damages awarded to the injured party to compensate them for the breach of contract but not to punish the breaching party.
compensatory damages
An amount predetermined by the parties to a contract as compensation to an injured party if the other party breaches the contract.
liquidated damages
Award of special damages if the breaching party entered the contract with plans to breach; injured party may sue for lost profits.
consequential damages
A legal action to compel a party to carry out the terms of a contract.
specific performance
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.
rescission
That law pertaining to the period of time within which certain actions must be brought to court or be lost.
statute of limitations
A rider to a contract with additional terms or conditions.
addendum aka riders
A form of selling property where oral bids are taken and the property is sold to the highest bidder.
auction
The seller reserves the right to stop the bidding if it becomes apparent that the high bid will be unacceptable
Auction with reserve
The seller agrees to accept the high bid, no matter what the terms of that bid.
Auction without reserve aka absolute action
