LESSON 3: INTRO TO CONTRACTS

Question 1

Question 2

What are the three stages of a contract?

Answer 2

Offer, acceptance, and performance.

Question 3

What does the Statute of Frauds require for real estate contracts?

Answer 3

All real estate contracts must be in writing and signed in order to be enforceable.

Question 4

What are the five elements of a valid contract?

Answer 4

1. Legally competent parties 2. Mutual assent 3. Lawful objective 4. Consideration 5. Contract is in writing

Question 5

What does mutual assent mean in contract law?

Answer 5

Mutual assent refers to the agreement of all parties that the contract is valid prior to signing, with no fraud, misrepresentation, or duress involved.

Question 6

What happens if a contract is voidable?

Answer 6

If a contract is voidable, one party may rescind or void the contract. Examples include when a party is a minor or mentally incompetent.

Question 7

What happens if a contract is void?

Answer 7

A void contract has no legal effect and cannot be enforced because the terms do not create legal rights or call for illegal acts.

Question 8

What is the difference between fraud and misrepresentation in contracts?

Answer 8

Fraud involves intentional deceit, while misrepresentation involves false information but may not be intentional. Fraud typically causes harm and malice is involved.

Question 9

What does “competent parties” mean in a contract?

Answer 9

The parties to the contract must be 18 or older, of sound mind, and not intoxicated. If a minor or someone mentally incompetent is involved, the contract may be voidable or void.

Question 10

What is a power of attorney?

Answer 10

A power of attorney grants someone the authority to act on behalf of another person, known as the principal, for specific actions like managing real estate, banking, or legal decisions.

Question 11

What is a nondurable power of attorney?

Answer 11

A nondurable power of attorney takes effect immediately and is often used for specific transactions. It remains in effect until revoked or the principal becomes mentally incompetent or passes away.

Question 12

What is a durable power of attorney?

Answer 12

A durable power of attorney allows the attorney-in-fact to act on behalf of the principal even if the principal becomes mentally or physically incapable. It remains in effect until revoked or the principal dies.

Question 13

What is a springing power of attorney?

Answer 13

A springing power of attorney becomes effective when a specific event, like mental or physical incapacity, happens to the principal.

Question 14

What are some factors that make a contract unenforceable?

Answer 14

False information, fraud, misrepresentation, duress, or mistakes in the terms of the contract can make the agreement unenforceable.

Question 15

What does “mutual assent” involve in a real estate contract?

Answer 15

It requires an offer and acceptance, and no fraud or misrepresentation in the contract. If one party accepts an offer, it indicates mutual assent to the terms of the agreement.

Question 16

What happens if fraud is involved in a contract?

Answer 16

If fraud is involved, it means one party intentionally deceives the other to gain something valuable. Fraud leads to damages and can make the contract voidable.

Question 17

Can a contract be enforced with a minor as a party?

Answer 17

A contract with a minor is voidable. The minor may void the contract at any time, and the contract may be ratified when the minor reaches adulthood.

Question 18

What is Innocent Misrepresentation?

Answer 18

Innocent misrepresentation occurs when wrong information is provided, but it is not done intentionally or for deceiving. It causes another individual to suffer a loss or injury.

Question 19

What is a Mistake in a contract?

Answer 19

A mistake in contracts occurs when there is an unintentional ambiguity or oversight that affects the agreement. It is an honest misinterpretation of the facts and information provided.

Question 20

What is Duress in contract law?

Answer 20

Duress in contract law occurs when one party is forced to accept the contract, making it void. For example, blackmail or coercion to change the terms of a contract is duress.

Question 21

What is meant by Lawful Objective in a contract?

Answer 21

The purpose of the contract must be lawful, meaning that it cannot call for any illegal activities. If the objective is unlawful, the contract is void.

Question 22

What is Consideration in a contract?

Answer 22

Consideration refers to something of value that each party provides in exchange for something else. Valuable consideration includes money or property, while good consideration could be a gift or a promise for love. It is necessary for a contract to be enforceable.

Question 23

What is a failure of consideration?

Answer 23

A failure of consideration occurs when one party does not perform their obligation in a contract. For example, if one party does not fulfill their promise, it is considered a failure of consideration.

Question 24

What is the definition of “Reasonable Time” for depositing money in real estate transactions in Texas?

Answer 24

“Reasonable time” for depositing money in Texas real estate transactions is by the close of business on the second working day after execution of the contract, unless otherwise agreed upon in writing.

Question 25

What is the Statute of Frauds in contract law?

Answer 25

The Statute of Frauds requires certain contracts, like those related to real estate or leases longer than one year, to be in writing to be enforceable.

Question 26

What is the Parol Evidence Rule?

Answer 26

The Parol Evidence Rule prohibits someone from changing the terms of a written contract by testifying that the contract does not include all terms or is different from what was agreed.

Question 27

What does the Statute of Frauds prevent?

Answer 27

The Statute of Frauds prevents fraudulent conduct and ensures that contracts are written to reduce misunderstandings and litigation. It makes it difficult for a nonexistent contract to be enforced.

Question 28

What is an Express Contract?

Answer 28

An express contract is created when all parties explicitly agree, either orally or in writing, to the terms of the contract. If any party deviates from the terms, the injured party can seek legal recourse.

Question 29

What is an Implied Contract?

Answer 29

An implied contract is created through the actions or conduct of the parties rather than through written or spoken words. It involves an exchange of promises and is legally binding despite not being explicitly agreed upon.

Question 30

What is a Unilateral Contract?

Answer 30

A unilateral contract involves a promise made by only one party, with the other party not obligated to act unless certain conditions are met. For example, a reward offer is a unilateral contract.

Question 31

What is a Bilateral Contract?

Answer 31

A bilateral contract is a mutual agreement where both parties provide consideration and promise to perform certain actions, creating reciprocal obligations.

Question 32

What is a Valid Contract?

Answer 32

A valid contract is legally enforceable by courts and binds the parties. It must have mutual assent, competent parties, consideration, a lawful objective, and adherence to the statute of frauds, if required.

Question 33

What is a Void Contract?

Answer 33

A void contract has no legal effect and is considered as if it never existed. It is unenforceable and often arises from illegal activities, fraud, misrepresentation, duress, or undue influence.

Question 34

What is a Voidable Contract?

Answer 34

A voidable contract is one that at least one party can declare non-binding. It may be voided by an incompetent party or a minor, but can be ratified upon returning to competency.

Question 35

What is an Unenforceable Contract?

Answer 35

An unenforceable contract was once valid but cannot be legally enforced due to a technicality, such as the statute of limitations or conflicting state legislation.

Question 36

What is the Statute of Frauds?

Answer 36

The Statute of Frauds requires certain contracts to be written and signed by all parties to be enforceable. It prevents fraud and ensures clarity in agreements.

Question 37

What is the Statute of Limitations?

Answer 37

It sets a time limit for filing civil lawsuits. For example, in Texas, claims on a returned check must be made within three years.

Question 38

What is the Doctrine of Laches?

Answer 38

The Doctrine of Laches bars claims when there is an unreasonable delay or negligence in asserting a right. If a party delays too long, they may lose their right to sue.

Question 39

What is an Example of an Unenforceable Contract?

Answer 39

A verbal agreement for the sale and purchase of a home is unenforceable under the Statute of Frauds because it must be in writing to be valid.

Question 40

What is an Executory Contract?

Answer 40

An executory contract is one where the performance of one or more parties is incomplete. Example: A lease agreement where obligations continue over time.

Question 41

What is an Executed Contract?

Answer 41

An executed contract is one that is fully performed at the time of signing. Example: A deed of real property where the obligations are completed when the deed is signed and transferred.

Question 42

What is Inverse Condemnation?

Answer 42

Inverse condemnation refers to a situation where the government takes private property but fails to pay the just compensation required by law. The owner must sue the government for compensation.