Chapter 8: Basic Contract Law

Question 1

refers to a transfer of rights or duties but not the liabilities under a contract to a third party. Rights or interest being transferred could be in a bond, a mortgage, a lease, or another instrument

Answer 1

assignment

Question 2

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

Answer 2

auction

Question 3

both parties promise to do or refrain from doing something; one promise is exchanged for another

Answer 3

bilateral contract

Question 4

a violation, without legal excuse, of any of the terms or conditions of a contract, as when a seller breches a sales contract by not delivering title to the buyer under the conditions stated in the agreement.

Answer 4

breach of contract

Question 5

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

Answer 5

compensatory damages

Question 6

special damages that might be obtained if the damages upon breach were reasonably foreseable to the breaching party at the time of making the contract. Also allows the injured party to sue for lost profits.

Answer 6

consequential damages

Question 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

Answer 7

consideration

Question 8

a legally enforceable promise or set of promises between legally competent parties, supported by legal consideration, to do (or refraid from doing) a legal act that must be perfomed and for wwhich the law provides a remedy if a breach of promise occurs

Answer 8

contract

Question 9

any attempt by the offeree to change any of the terms proposed by the offeror

Answer 9

counteroffer

Question 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. Considered liquidated damages in the event the buyer breaches the contract.

Answer 10

earnest money deposit

Question 11

one in which all parties have fulfilled their promises and, therefore, fully performed the contract, such as a sales contract that has closed.

Answer 11

executed contract

Question 12

exists when something remains to be done by one or both parties

Answer 12

executory contract

Question 13

the parties state the terms and show their intentions in words to that effect. May be oral or written

Answer 13

express contract

Question 14

the agreement of the parties is demonstrated by their actions or conduct

Answer 14

implied contract

Question 15

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

Answer 15

legality of object

Question 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

Answer 16

legally competent parties

Question 17

the amount of money that will compensate the injured party for breach, which the parties agree to at the time they enter into the contract.

Answer 17

liquidated damages Example: earneset money deposit

Question 18

mutual assent occurs when this happens

Answer 18

“meeting of the minds”

Question 19

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

Answer 19

mutual assent

Question 20

Substituting a new contract for an old one or substituting new parties to an existing contract

Answer 20

novation (nova means new)

Question 21

The promise of 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

Answer 21

offer

Question 22

two essential components of a valid contract

Answer 22

offer and acceptance

Question 23

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

Answer 23

parol evidence rule

Question 24

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

Answer 24

reality of consent

Question 25

the contract is declared invalid and both parties return to the position they were in before they entered into the contract. May be appropriate when facts were misrepresented or one party yentered the contract under duress

Answer 25

rescission

Question 26

A legal action to compel a party to carry out the terms of a contract. The injured party may file a court action to force the other party to perform the contract as agreed.

Answer 26

specific performance

Question 27

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

Answer 27

statute of frauds

Question 28

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

Answer 28

statute of limitations

Question 29

A phrase in a ontract 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

Answer 29

time is of the essence

Question 30

has all the elements of a valid contract; however, neither party can sue the other to force performance. Ex: oral agreement

Answer 30

unenforceable contract

Question 31

one party makes a promise to induce a second party to do something. Second party is not legally obligated to act

Answer 31

unilateral contract

Question 32

compleis with all the essential elements of a contract. Binding and enforceable on both parties

Answer 32

valid contract

Question 33

one that seems, on the surface, to be valid but may be rescinded, or disaffirmed, by one of the parties, based on some legal principle

Answer 33

voidable contract

Question 34

one that has no legal force or effect. It is unenforceable in a court of law because it does not meet the essential elements of a contract. May be fully executed unless one of the parties disaffirms it

Answer 34

void contract