Contracts

Question 1

What are contracts?

Answer 1

Legally binding agreement between 2 or more parties to do or not to do something.
Parties can be legal persons (like an LLC, an individual, etc.)

Question 2

What is “performance” in terms of contracts?

Answer 2

Doing what you promised under a contract.

Question 3

What are the essentials of contracts & statuses?

Answer 3

The requirements are:

1. Offer and acceptance (meeting of the minds): Buyer puts in an offer and the seller accepts.
2. Consideration (exchange of value between parties): buyers gives the money, seller gives the house.
3. Legal Object (Needs to be a contract to do something legal): like selling a house.
4. Reality of Consent (both parties voluntarily accept) & competence (mental capacity to understand and consent).

Question 4

If you don’t have one of the first three essentials of a contract, what does the contract become?

Answer 4

Void.

Question 5

If there is any misrepresentation or fraud in the contract, what does the contract become?

Answer 5

Voidable (up to victim to make it void).

Question 6

If someone signs a contract under duress or undue influence, what does the contract become?

Answer 6

Voidable (up to victim to make it void).

Question 7

What is duress?

Answer 7

Someone forcing you to sign a contract.

Question 8

What is undue influence?

Answer 8

Someone having power over you to try to get you to sign a contract.

Question 9

If someone is not old enough to sign a contract or lacks the competence to sign a contract for whatever reason, the contract becomes what?

Answer 9

Voidable (up to victim to make it void).

Question 10

What does it mean to have an unenforceable contract?

Answer 10

Cant be enforced if the court deems it to be unfair or impossible.

Question 11

What is the Statute of Frauds?

Answer 11

States that all real estate contracts must be in writing to be enforceable.
-The P&S needs to be in writing, as well the deed.

Question 12

What is the Doctrine of Laches?

Answer 12

You lose your right to void a contract if you fail to assert the right within a reasonable time frame. The time frame would be decided by a judge.

Question 13

What is a Statute of Limitations?

Answer 13

Hard legal limit as to when you can assert your rights to bring to bring someone to court.
Can be used to render a contract unenforceable after a certain time frame is passed (about 6 years).

Question 14

Unilateral Contract

Answer 14

A contract where one party makes a promise, & the other party will need to perform in order to complete the contract.
Example: Radio contest, listing contract, etc.

Question 15

Bilateral Contract

Answer 15

A contract where 2 (or more) parties make promises to one another.
example: P&S, lease, employment, offer to purchase, deed, etc.

Question 16

Executory

Answer 16

The contract is not yet completed (the parties entered a contract, but it is not completed).

Question 17

Executory Phase

Answer 17

Time between P&S and closing. Time where due diligence is done; inspections, financing, title search, etc.

Question 18

Executed

Answer 18

When the transaction has been fully completed…AKA the closing.

Question 19

Assignment

Answer 19

Transfer of a party’s rights & obligations to another.

Question 20

Assignor

Answer 20

Gives the contract to someone.

Question 21

Assignee

Answer 21

Receives the contract.

Question 22

Novation

Answer 22

When you cancel a contract and have someone else sign a new one.

Question 23

Power of Attorney

Answer 23

When someone else acts on your behalf.

Question 24

Ironclad Clause

Answer 24

Any agreement outside the written contract will not have any effect.
Also known as the integration clause, merger clause, and entire agreement clause.

Question 25

Severability

Answer 25

A clause stating that any part of a contract that is illegal will be voided, but the rest will remain in effect.

Question 26

Contingency Clause

Answer 26

Makes a contract contingent on something happening (like obtaining financing).
If it doesn’t happen, the contract is voided.

Question 27

Breach of Contract

Answer 27

One of the parties under the contract didn’t do what they promised.

Question 28

Doctrine of Privity

Answer 28

Gives the party a right to sue the other party for a breach in contract.

Question 29

When there is a breach of contract what can happen?

Answer 29

Rescission: Cancellation of the contract.
Specific Performance: A court order forcing the party in violation to comply w/ the terms of the contract.
Damages: Monetary compensation for harm suffered as a result of the breach.
Liquidated Damages: Per agreed upon monetary compensation for breach (like forfeiture: loss of deposit).