Real Estate Contracts

Question 1

Contract

Answer 1

a voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform (or refrain from performing) some legal act

Question 2

Lawful Consideration

Answer 2

must be supported by something of value that induces a party to enter into the contract

Question 3

Express Contract

Answer 3

parties state the terms and show their intentions in words, either oral or written

Question 4

Implied Contract

Answer 4

the agreement of the parties is demonstrated by their acts and conduct

Question 5

Statute of Frauds

Answer 5

the requirement of certain contracts to be in writing which makes them enforceable by law

Question 6

Bilateral Contract

Answer 6

both parties promise to do something, one promise is given in exchange for another

Question 7

Unilateral Contract

Answer 7

a one sided agreement where one party makes a promise in order to entice a second party to do something; usually accepted by the performance of the party to whom the offer is made

Question 8

Executed Contract

Answer 8

one in which all parties have fulfilled their promises

Question 9

Executory Contract

Answer 9

when one or both parties still have an act to perform

Question 10

Offer and Acceptance

Answer 10

in a real estate sales transaction, the sales contract sets out the offer by the buyer that is accepted by the seller

Question 11

Offeror

Answer 11

the person who makes the offer

Question 12

Offeree

Answer 12

the person to whom the offer is made

Question 13

Offer

Answer 13

a promise made by one party, requesting something in exchange for that promise

Question 14

Acceptance

Answer 14

a promise by the offeree to be bound by the exact terms proposed by the offeror

Question 15

Letter of Intent

Answer 15

used to indicate the interest of a prospective buyer or lessee and if interest is reciprocated to begin negotiations

Question 16

Consideration

Answer 16

something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act

Question 17

Valid Contract

Answer 17

one that meets all the essential elements that make it legally sufficient or enforceable and is binding in a court of law

Question 18

Void Contract

Answer 18

has no legal force or effect because it lacks some or all of the essential elements of a contract

Question 19

Voidable Contract

Answer 19

appears on the surface to be valid but it may be rescinded or disaffirmed by one or both parties based on some legal principle ie. was signed by a minor

Question 20

Enforceable Contract

Answer 20

meets all elements of a valid contract including compliance with any applicable statute of frauds

Question 21

Unenforceable Contract

Answer 21

appears on the surface to be valid; however, neither party can sue the other to force performance

Question 22

Time is of the Essence

Answer 22

each of the elements of the contract must be performed within the specified time

Question 23

Reasonable Time

Answer 23

no written date

Question 24

Assignment

Answer 24

a transfer of rights or duties under a contract

Question 25

Novation

Answer 25

substitution of a new contract for an existing contract

Question 26

Breach of Contract

Answer 26

a violation of any of the terms or conditions of a contract

Question 27

Suit for Specific Performance

Answer 27

the buyer asks the court to force the seller to go through with the sale and transfer the property as previously agreed

Question 28

Liquidated Damages Clause

Answer 28

specifies the amount of money to which the seller is entitled if the buyer breaches contract

Question 29

Rescission

Answer 29

returns the parties to their original positions before the contract, so any monies or property exchanged must be returned; remedy for breach of contract

Question 30

Offer

Answer 30

real estate sales agreement that has been prepared and signed by the prospective buyer and communicated to the seller; may be withdrawn at any time before it has been accepted

Question 31

Counteroffer

Answer 31

any change by the seller to the terms proposed by the buyer; may be withdrawn at any time before it has been accepted

Question 32

Acceptance

Answer 32

when the seller agree to the original offer or a later counteroffer exactly as it is made, signs the document and the seller's representative advises the buyer / buyer's representative of the seller's acceptance

Question 33

Earnest Money

Answer 33

a deposit made when making an offer to purchase real estate; evidence of the buyer's intention to carry out the terms of the contract in good faith - discourages the buyer from defaulting, compensates the seller for taking the property off the market and covers any expenses the seller might incur if the buyer defaults

Question 34

Equitable Title

Answer 34

after the buyer and seller have executed a sales contract it is the buyer's acquired interest in the land; rights vary by state

Question 35

Contingencies

Answer 35

conditions that must be satisfied before a sales contract is fully enforceable

Question 36

Escape Clause

Answer 36

permits the seller to continue to market the property until all the buyer's contingencies have been satisfied or removed

Question 37

Amendment

Answer 37

a change or modification to the existing content of a contract

Question 38

Addendum

Answer 38

any provision added to an existing contract that may change or be an addition to the content of the original

Question 39

Owner Financing

Answer 39

the seller provides credit for all or part of the funds that will allow the buyer to move forward with the transaction

Question 40

Land Contract

Answer 40

the owner/ seller (vendor) retains legal title; the buyer (vendee) takes possession and gets equitable title to the property