Chapter 8

Question 1

Assignment

Answer 1

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

Question 2

Auction

Answer 2

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

Question 3

Bilateral Contract

Answer 3

Contract where all parties to the instrument are legally bound to act as prescribed

Question 4

Breach of Contract

Answer 4

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

Question 5

Compensatory Damages

Answer 5

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

Question 6

Consequential Damages

Answer 6

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

Question 7

Consideration

Answer 7

(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

Question 8

Contract

Answer 8

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

Can Be:

(1) Unilateral- only one party is bound to act
(2) Bilateral - all parties to the instrument are legally bound to act as prescribed

Question 9

Counteroffer

Answer 9

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

Question 10

Earnest Money Deposit

Answer 10

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

Question 11

Executed Contract

Answer 11

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

Question 12

Executory Contract

Answer 12

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

Question 13

Express Agreement/Contract

Answer 13

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

Question 14

Implied Agreement/Contract

Answer 14

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

Question 15

Legality of Obect

Answer 15

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

Question 16

Legally Competent Parties

Answer 16

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

Question 17

Liquidated Damages

Answer 17

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

Question 18

Meeting of the Minds/Mutual Assent

Answer 18

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

Question 19

Novation

Answer 19

Substituting a new contract for an old one

or substituting new parties to an existing contract

Question 20

Offer

Answer 20

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

Question 21

Offer and Acceptance

Answer 21

Two essential components of a valid contract; See mutual assent and acceptance

Question 22

Parol Evidence Rule

Answer 22

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

Question 23

Reality of Consent

Answer 23

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

Question 24

Rescission

Answer 24

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

Question 25

Specific Performance

Answer 25

A legal action to compel a party to

carry out the terms of a contract

Question 26

Statute of Frauds

Answer 26

A state law that requires that certain instruments that convey interest in real estate be in writ- ing to be legally enforceable, such as deeds, real estate sales contracts, and certain leases

Question 27

Statute of Limitations

Answer 27

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

Question 28

Time is of the Essence

Answer 28

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

Question 29

Unenforceable Contract

Answer 29

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

Question 30

Unilateral Contract

Answer 30

A one-sided contract wherein one party makes a promise to induce a second party to do some-thing. 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

Question 31

Valid Contract

Answer 31

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

Question 32

Voidable Contract

Answer 32

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

Question 33

Void Contract

Answer 33

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