Contracts

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Author:
boycew
ID:
228428
Filename:
Contracts
Updated:
2013-07-29 12:52:22
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Real Estate
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Description:
Real Estate Study
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  1. Contract
    is an agreement between 2 parties. It can be an agreement to do something or not to do something.Contract for forbearance - an agreement not to do something.
  2. Contracts can be?
    written or oral
  3. Another name for Oral contract?
    Parol contract
  4. Expressed contract definition
    one in which the intent of the parties is stated (expressed) in the contract itself. can be written or oral
  5. Implied contract definition
    one in which the intent of the parties is not stated but is indicated by their actions.
  6. Valid contract
    one that is legally sufficient and meets all the requirements of the law.a valid contract can be either enforceable {can be enforced  in a court of law} or unenforceable{cannot be enforced in a court of law, valid until challenged in court}
  7. Void contract
    one that is not recognized legally and has no legal effect. (not binding to either party)
  8. Voidable contract
    one that is capable of being voided by one of the parties to the contract. (it is binding on one party to the contract only. it is valid until the action is taken by one party to make it void.)
  9. Bilateral contract
    one in which both parties promise to give up something.
  10. Unilateral contract
    one in which only one party promises to give up something
  11. Executed contract
    one which all requirements of the contract have been fulfilled and the parties have done what they agreed to do in the contract.
  12. Executory contract
    one in which some or all the requirements have not yet been completed
  13. 4 elements that are required for a contract to be valid
    • Consideration
    • Agreement
    • Legal objective
    • Legal competent parties
  14. consideration
    a promise that someone makes to give up something of value.
  15. valuable consideration
    anything that has a monetary value such as money, services, merchandise, etc.
  16. good consideration
    something of worth that does not have a monetary value such as love, affection, or goodwill.
  17. agreement
    “meeting of the minds” or “offer & acceptance”
  18. 3 conditions must be met for mutual agreement
    1.  one party ( the offeror) must make an offer to the other party ( the offeree)           2.  the offeree must accept the offer             3.  the offeree must communicate the acceptance to the offeror. (If the offeree does not accept the original offer of the offeror, they may make a counteroffer which terminates the original offer. Once an offer is made, it can be withdrawn by the offeror any  time before the acceptance is communicated to the offeror.)
  19. What are the second conditions of a mutual agreement must not occur in order for an agreement to be met?
    • fraud
    • innocent misrepresentation
    • mistake
  20. fraud
    • an act intended to deceive someone in order to get him/her to give up something of value.
    • 1. giving false information
    • 2. withholding relevant information
  21. What action can the injured party take when confronted with fraud?
    the injured party has the option to rescind(cancel) the contract or to leave it in effect.
  22. innocent misrepresentation
    the giving of incorrect information by one party without the intent to deceive. (the injured party has the option to rescind(cancel) the contract, if done in a timely manner)
  23. mistake
    an error in the facts of a transaction that occurs: mutually by both parties, unintentionally, without negligence.
  24. what third condition must be met in order for a contract to be valid?
    offer & acceptance must be genuine & freely given with no duress or undue influence
  25. duress
    forcing someone to do something against their will
  26. undue influence
    taking unfair advantage of someone
  27. What happens to contracts that a formed under duress or undue influence?
    the injured party has the option to rescind(cancel) the contract pr leave it in effect. [ it is avoidable]
  28. Legal objective
    cannot call for action that violates the law
  29. What are the 3 primary categories of people who are not legally competent?
    • minors
    • intoxicated persons
    • insane persons
  30. minors
    a person who has not reached the legal age requirement (age of majority). most contracts with minors are voidable so long as the minor elects to avoid the contract while still a minor or within a reasonable period after reaching the age of majority.
  31. intoxicated persons
    a person who is intoxicated is not legally competent
  32. insane persons
    persons of unsound mind who have been declared incompetent by the court.
  33. Attorney-in-fact
    is someone who has been granted power of attorney, limited to the specific transactions named in the document.
  34. corporations
    considered to be artificial persons and may enter into valid contracts.[ signing official must have approval of the board of directors in the form of a resolution.] In gGA the corporate seal must be affixed or 2 officers must sign.
  35. Assignment
    the transfer of one’s interest in a contract to another person.Executory contracts can be assigned unless prohibited in the contract.Executed contracts can not be assigned since they have been performed already.
  36. Assignor
    person who assigns his/hers interest.
  37. Assignee
    the person whom the interest is assigned. (once assigned becomes primarily liable for fulfillment of the contract
  38. Novation
    the substitution of a new contract between both parties which terminates and replaces the old contract or the substitution of new parties for an existing contract.
  39. What ways can termination of a contract can occur?
    mutual agreement of the parties, expiration of time, rescission of a voidable contract, operation of law - destruction of the property, bankruptcy of either party, death of one of the parties.
  40. Statute of frauds
    some real estate contracts must be in writing to be enforceable.
  41. Oral contracts that are valid?
    • open listings- listing agreements that allow more than one broker to sell the property. (enforceable)
    • leases for a period of one year or less (enforceable)
    • sales contracts (unenforceable)
    • leases over 1 year (unenforceable)
  42. Option contract
    a contract which gives the right to buy property. (gives an exclusive right to buy)
  43. Optionor
    the person who gives the option. (the right to buy property)
  44. Optionee
    the person who receives the option (the right to buy property.)
  45. When the optionee exercises his/her option to buy what contract does it become?
    sales contract for the sale of property
  46. when an option is signed what must the optionee pay?
    valuable consideration (money or equivalent)
  47. If the option is not exercised what happens to the money paid?
    it is forfeited
  48. Are options assignable?
    yes unless prohibited in the contract
  49. What are the interest in property under an option contract?
    • 1. during the option period, the optionor retains title and all rights to the property.
    • 2. the optionee has no legal rights in the property under the option contract.
    • 3. once the option is exercised, the buyer has equitable title.
  50. What is an option contract if not exercised?
    executory contract
  51. what is an option contract when exercised?
    executed contract
  52. Is a option contract unilateral or bilateral?
    unilateral
  53. What is the right to first refusal?
    • 1. is a right to have the first opportunity to buy the property.
    • 2. has no predetermined price for buying the property.
    • 3. has no fixed time to purchase the property.
  54. What are the elements of an option contract?
    • 1. the optionee has an exclusive right to buy the property.
    • 2. there must be a predetermined price for the property.
    • 3. the option must be in effect for a fixed period of time.
  55. breach of contract
    occurs when one party fails to live up to his/her contractual obligations.
  56. remedies for breach of contract
    • partial performance
    • rescission
    • sue for specific performance
    • sue for damages
    • liquidated damages
  57. partial performance
    the innocent party may except partial completion of the contract as satisfactory.
  58. rescission
    the innocent party may rescind(cancel) the contract unilaterally, or the parties may mutally agree to rescind.
  59. sue for specific performance
    the innocent party amy sue the other party in court to carry out the requirements of the contract.
  60. sue for damages
    the innocent party may go to court to sue for monetary damages.
  61. liquidated damages
    the parties may determine in advance a sum to be paid to the innocent party in the event of a breach
  62. "time is of the essence"
    a contract must be performed on or before the date specified in the contract
  63. types of real estate contracts
    • contract of sale
    • back-up contract
    • binder
    • installment contract
    • deed
    • deed of trust
    • lease
    • listing contract
    • mortgage
  64. contract of sale
    a written agreement wherein a seller agrees to sell and a buyer agrees to buy real estate on the terms and conditions set forth therein. (sales contract)
  65. What are the reasons for having a sales contract followed buy a closing at a later date?
    • 1. the buyer needs time before a transaction is completed to determine whether the seller has good title and the legal right to convey title
    • 2. the buyer needs time to arrange financing
    • 3. the contract sets forth the duties and obligations of the parties to the sale at closing
  66. Earnest money
    • money that is paid by the buyer at the time the sales contract is signed.
    • 1. not legally necessary, but is good business practice
    • 2. shows good faith
  67. back-up contract
    a contract of sale accepted by the seller with the stated understanding that the seller has already accepted the offer.
  68. binder
    a short purchase contract used in some states to secure a real estate transaction until a more formal contract can be prepared by an attorney.
  69. installment contract
    • land contract
    • contract for deed
    • contract for title
  70. an installment is a contract of sale under which:
    • 1. the seller retains title
    • 2. the purchaser takes possession while installment payments are being made
  71. an installment contract is often used when?
    the seller provides financing for the sale but is not sure of the buyers ability to pay
  72. installment contract seller and buyer hold which title?
    • seller holds legal title
    • buyer holds equitable title until property is paid for

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