Unit 12

Consideration

(1) That received by the grantor in exchange for the deed. (2) Something of value that induces a person to enter into a contract.

Amendment

A change to the existing content of a contract (i.e., if words or provisions are added to or deleted from the body of the contract). It must be initialed by all parties.

Executed Contract

A contract in which all parties have fulfilled their promises and thus performed the contract.

Valid Contract

A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.

Unenforceable Contract

A contract that has all the elements of a valid contract, yet neither party can sue the other to force performance of it. For example, an unsigned contract is generally unenforceable.

Void Contract

A contract that has no legal force or effect because it does not meet the essential elements of a contract.

Enforceable Contract

A contract that meets all the elements of a valid contract, including compliance with any applicable statute of frauds or other law that requires it to be in writing and signed by the parties.

Voidable Contract

A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties.

Executory Contract

A contract under which something remains to be done by one or more of the parties.

Bilateral Contract

A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

Contract

A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

liquidated damages clause

A liquidated damages clause in a real estate purchase contract specifies the amount of money to which the seller is entitled if the buyer breaches the contract.

Counteroffer

A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

Purchase Money Mortgage (PMM)

A note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate.

Unilateral Contract

A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.

"time Is Of The Essence"

A phrase in a contract that requires the performance of a certain act within a stated period of time.

Real Estate Sales Contract

A real estate sales contract contains the complete agreement between a buyer of a parcel of real estate and its seller.

Land Contract

A transaction in which the sales price is paid in two or more installments over two or more years. If the sale meets certain requirements, a taxpayer can postpone reporting such income until future years by paying tax each year only on the proceeds received that year. Also called an installment sale.

Equitable Title

After both buyer and seller have executed a sales contract, however, the buyer acquires an interest in the land known as equitable title.

Option

An agreement to keep open for a set period an offer to sell or purchase property.

Liquidation Damages

An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract.

Addendum

Any provision added to an existing contract without altering the content of the original. It must be signed by all parties.

Suit For Specific Performance

In a suit for specific performance, the buyer asks the court to force the seller to go through with the sale and transfer the property as previously agreed.

Express Contract

In an express contract, the parties state the terms and show their intentions in words, either oral or written. Most real estate contracts are express contracts and are written.

Implied Contract

In an implied contract, the agreement of the parties is demonstrated by their acts and conduct.

Earnest Money

Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but to be applied to the purchase price if the sale is closed.

Contingencies

Provisions in a contract that require a certain act to be done or a certain event to occur before the contract becomes binding.

Disclosure

Relevant information or facts that are known or should have been known.

Novation

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

Statute of Laws

That part of a state law that requires certain instruments, such as deeds, real estate sales contracts, and certain leases, to be in writing to be legally enforceable.

Rescission

The practice of one party canceling or terminating a contract, which has the effect of returning the parties to their original positions before the contract was made.

Owner Financing

The seller is the primary lender, securing the property by means of a deed, note and mortgage, deed of trust, or contract for deed. In its traditional form, the buyer takes possession of the property and the seller retains legal title until paid in full, but some states have softened this outcome to provide that the buyer is entitled to legal title after a specified period of successful loan payments.

Assignment

The transfer in writing of interest in a bond, mortgage, lease, or other instrument.

Offer and Accept

Two essential components of a valid contract; a "meeting of the minds." An offer is a promise made by the offeror, requesting something in exchange for that promise. Acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror.

Breach Of Contract

Violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due.