Unit 5: Essential Elements of a Valid Contract Flashcards Preview

National Real Estate Exam > Unit 5: Essential Elements of a Valid Contract > Flashcards

Flashcards in Unit 5: Essential Elements of a Valid Contract Deck (19)
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1
Q

What are the 5 essential elements of a valid contract?

A

1) Competent Parties
2) Meeting of the Minds
3) Lawful Objective
4) Consideration
5) In writing and signed

2
Q

How is an individual deemed competent?

A

They are 18 years or older, sane, and sober.

3
Q

What is a counteroffer?

A

A response to a contract offer that changes the terms of the original offer.

4
Q

T/F A counteroffer is a partial acceptance, partial rejection, or partial termination of the contract.

A

False. A counteroffer is a NOT a partial acceptance, partial rejection, or partial termination of the contract. Rather a counteroffer terminates the original offer and creates a new one.

5
Q

What are 2 other names for the Offer & Acceptance element of a contract?

A

1) Mutual Consent

2) Meeting of the Minds

6
Q

When does a contract become binding?

A

When there is communication of acceptance.

7
Q

Can there be fraud or misrepresentation in a valid contract?

A

No. The parties may not make false statements or omit material facts.

8
Q

T/F Sellers do not have to disclose all material defects and facts even if selling “as is”.

A

False. Sellers MUST disclose all material defects and facts even if selling “as is”.

9
Q

What does the Lawful Objective element mean?

A

The contract must have a legal purpose.

10
Q

T/F Earnest money is an example of a consideration.

A

False. Earnest money is NOT a consideration for a sales contract and therefore is not required.

Earnest money is “good faith $”

11
Q

What is a consideration?

A

Consideration is money, promises, or something of value.

12
Q

What is an addendum?

A

Additional material attached to and made part of an offer.

13
Q

Disclosures and contingencies are examples of what part of a contract?

A

Addendum

14
Q

What is an amendment?

A

Modifications of contract terms by mutual agreement.

15
Q

T/F Amendment may be done verbally between parties.

A

False. Amendments MUST be in writing and signed by all parties.

16
Q

What does an assignment do?

A

Transfers contract rights but not liability. An example would be a renter wants to sublet.

17
Q

What is a novation?

A

The withdrawal of one party to a contract and the substitution of a new party. Transfers contract rights and liability.

18
Q

T/F In a novation, the new contract replaces the original contract.

A

True

19
Q

What is the statute of limitations?

A

It is the amount of time parties will be given to file a claim or lawsuit.