Vocabulary: Chapter 14-Real Estate Contracts

Question 1

Addendum

Answer 1

Any provision added to an existing contract without altering the content of the original. Must be SIGNED by all parties

Question 2

Amendment

Answer 2

A change to the existing content of a contract (i.e., if words or provisions are added to or deleted from the body of the contract). Must be INITIALED by all parties

Question 3

Assignment

Answer 3

The transfer in writing of interest in a bond, mortgage, lease, or other instrument. (TRANSFER OF INTEREST)

Question 4

Bilateral Contract

Answer 4

A contract in which a promise is made for another promise. (I promise to pay you if you promise to wash my car)

Question 5

Breach of Contract

Answer 5

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

Question 6

Consideration

Answer 6

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

Question 7

Contingencies

Answer 7

A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding

Question 8

Contract

Answer 8

A voluntary, legally enforceable promise between two competent parties to perform (or not perform) some legal act in exchange for consideration

Question 9

Counteroffer

Answer 9

A new offer made in response to an offer received, It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror

Question 10

Disclosure

Answer 10

Relevant information or facts that are known or should have been known

Question 11

Earnest Money

Answer 11

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

Question 12

Equitable title

Answer 12

The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another’s name

Question 13

Executed Contract

Answer 13

A contract in which all parties have fulfilled their promises and thus performed the contract

Question 14

Executory contract

Answer 14

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

Question 15

Implied Contract

Answer 15

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

Question 16

Land Contract

Answer 16

(INSTALLMENT CONTRACT) transaction in which the sales price is paid in two or more installments over two or more years, if the sale meets certain requirements, a taxpayer can postpone reporting such income until future years by paying tax each year only on the proceeds received that year

Question 17

Liquidated Damages

Answer 17

An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract

Question 18

Novation

Answer 18

Substituting a NEW (NOVA) obligation for an old one or substituting new parties to an existing obligation

Question 19

Offer and Acceptance

Answer 19

Two essential components of a valid contract; “meeting of the minds”

Question 20

Option

Answer 20

An agreement to keep open for a set period an offer to sell or purchase property (Unilateral Contract!)

Question 21

Rescission

Answer 21

The practice of one party canceling or terminating a contract, which has the effect of returning the parties to their original positions before the contract was made

Question 22

Statute of Frauds

Answer 22

The part of state law that requires certain instruments, such as deeds, real estate sale contracts, and certain leases (MORE THAN 1 YR) to be in writing to be legally enforceable

Question 23

Suit for Specific Performance

Answer 23

If the seller breaches a real estate sales contract, the buyer may sue, asking the court to force the seller to go through with the sale and convey the property as previously agreed

Question 24

“Time is of the essence”

Answer 24

A phrase in a contract that requires the performance of a certain act within a stated period of time

Question 25

Unenforceable contract

Answer 25

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, an unsigned contract is generally unenforceable

Question 26

Unilateral Contract

Answer 26

A contract in which only one party promises something if the other party takes action (IE “I will pay $500 dollars to whomever finds my cat)

Question 27

Valid Contract

Answer 27

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

Question 28

Void Contract

Answer 28

A contract that has no legal force or effect because it does not meet the essential elements of a contract (Example: a contract to do an illegal act, murder)

Question 29

Voidable Contract

Answer 29

A contract that seems to be valid on the surace but may be rejected or disaffirmed by one or both of the parties. (Usually by one party)

Question 30

Essentials of Valid Contract

Answer 30

1) Legally Competent parties
2) Voluntary
3) Consideration
4) Legal Act
5) Offer and Acceptance