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National PSI Exam > Contracts > Flashcards

Contracts Flashcards

1
Q

The stages of a real estate contract

A
  1. Listed
  2. Offer, acceptance, and communication of acceptance
  3. Under contract
  4. Closing
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2
Q

Offeror

A

Made last offer

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3
Q

Offeree

A

Received last offer

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4
Q

Attachments

A

Used to EXPLAIN (occurs in offer, acceptance & communication of acceptance stage)

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5
Q

Addendum

A

Attached to offers

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6
Q

Amendments

A

Used to MODIFY a contract (happens in the executory stage)

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7
Q

Who has equitable title when under contract?

A

Buyer

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8
Q

Who has legal title when under contract?

A

Seller

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9
Q

Express contract

A

can be oral or written

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10
Q

Implied contract

A

Created by actions, not in writing

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11
Q

Valid contract

A

Contains all essential elements, is binding on both parties, and is enforceable by the courts

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12
Q

Voidable contract

A

One party may disaffirm the contract if the party is a minor, or is subject to fraud, duress, or misrepresentation

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13
Q

Void

A

A contract that is not enforceable because it does not have the essential elements

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14
Q

Unilateral Contract

A

Promise is exchanged for performance (e.g., Alice promises to perform (“I will sell you my house”), if Bill decides he wants Alice to perform (“I may buy your house; let me decide”)

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15
Q

Bilateral Contract

A

Promise for a promise (e.g., Alice & Bill make equal promises; Alice: “I promise to sell you my house & deliver a deed,” Bill: “I promise to buy your house and pay you money”

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16
Q

Executed contract

A

Duties are completed by both parties; they are fully performed

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17
Q

Executory contract

A

One or both parties need to complete part of the contract; duties yet to be performed

18
Q

Assignment

A

Transfers obligation but not liability (e.g., sublease)

19
Q

Novation

A

A new contract replacing an old one; transfers obligations and liability

20
Q

Legal Impossibility

A

A duty required by the contract cannot be legally performed

21
Q

Death or incapacity

A

Contract is termination ONLY if no one is left to perform

22
Q

Amendments

A

Changes or modifies the contract; must be in writing and signed by all parties

23
Q

Addenda

A

Additional material attached to and made part of the initial agreement (offer); addenda/attachments EXPLAIN the items attached to offers

24
Q

Essential elements of a valid contract

A

Competent parties, meeting of the minds, lawful objective, consideration, in writing & signed by the parties

25
Q

Competent parties

A

Age of majority (18+) (voidable if minor), mentally sound (void if declared incompetent by a court) (an incompetent person can enter a contract ONLY if court appoint guardian to act on the person’s behalf)

26
Q

Meeting of the Minds (Offer & Acceptance)

A

Offer & communication of acceptance must be made before the offer has been withdrawn)

27
Q

When can an offer be withdrawn?

A

An offer maybe withdrawn by either party prior to communication of acceptance to the party who made the offer

28
Q

What does a qualified acceptance or counteroffer do to a contract?

A

It operates as a REJECTION and terminates the original offer

29
Q

When is a counteroffer accepted?

A

If it is signed/initialed by both parties

30
Q

Is a buyer who received counteroffer obligated to respond?

A

NO. A buyer who receives a counteroffer is not obligated to respond and may make an offer on a new property without obligation to the seller that countered the first offer

31
Q

Can a seller who countered sell to another party?

A

NO. The seller must withdraw the counteroffer before accepting an offer from another buyer

32
Q

Consideration

A

Money or something of value (NOT earnest money)

33
Q

Statute of Frauds

A

Requires that agreements be in writing to be enforceable; applies to ANY property type (but, DOES NOT apply to a lease of 12 months or less)

34
Q

Statute of Limitations

A

Sets the length of time parties will be given to file a claim or lawsuit

35
Q

Types of real estate contracts

A

Purchase agreement/offer to purchase/contract of sale, Option, or lease purchase

36
Q

Purchase Agreement

A
  1. The agreement is bilateral - promise for a promise;
  2. Offer becomes valid & binding when acceptance is communicated;
  3. It is executory until performance by all parties at closing;
  4. Buyer (vendee) has equitable title and is the equitable owner; seller (vendor) has legal title and is the legal owner;
  5. The agreement may include a contingency clause allowing the buyer to terminate under certain conditions (e.g., buyer would het earnest money back) if cancelled per the terms;
  6. Earnest money is NOT consideration and is not required to create a valid purchase agreement
37
Q

What are typical contingencies?

A

Financing, inspection, etc.

38
Q

What happens if a contingency is not satisfied?

A

If the buyer terminated the contract per a contingency, the buyer’s earnest money is returned; brokers are NOT PAID if a contract terminates per a contingency

39
Q

Option Contract

A
  1. Owner/seller gives buyer the right to buy for a set price & set term;
  2. Option fee is paid by the buyer for the right;
  3. Owner/seller retains option fee if buyer decides not to buy;
  4. Unilateral contract but becomes bilateral when option is exercised by the buyer;
  5. Unlike a bilateral, installment, or land contract, if the buyer decided not to purchase, the seller who gave the option would have no recourse agains the buyer
40
Q

Lease Purchase Agreement

A
  1. Lease purchase agreement is two contracts: a purchase agreement & a lease;
  2. Portion of lease payments ca be applied to a down payment of the proeprty
41
Q

Mutual Rescission

A

The mutual agreement of all parties to cancel all obligations; it returns all parties to their original condition before the contract was executed, the buyers money is returned (acceptable for major problems (e.g., the house burns down or there are many repair items) it is not acceptable if the buyer decides she does not like the property and wishes to buy another property)

42
Q

Remedies for Default

A
  1. Enforce specific performance (court action to enforce breaching parties to perform; the ONLY option for the buyer if the seller decides to terminate);
  2. Terminate the contract and receive earnest money as liquidated damages; thereby releasing both parties for the contract;
  3. Sue for actual damages

National PSI Exam (10 decks)

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