Ch. 14 Contract Law and Performance

The dividing line between long-term and short-term contracts is ___ year.

1

The law requires the court to examine four areas before a plaintiff may successfully collect for a breach of contract. 1. The first damage is _________, the damage must be __________ by the breach. 2. The second is that the amount of damages must be _________ _________. 3. The damages must have been reasonably _________ when the contract was performed. 4. The injured party must _________ the damages to reduce loss.

1. cause, caused 2. reasonably ascertainable 3. foreseeable 4. mitigate

The following contracts are invalid unless the same, or some note or memorandum therefore be in: 1. Writing and subscribed by the party to be ________, or by his agent, 2. An agreement for the leasing for a longer period than _____ year or for the sale of real property, 3. Or of an ______ therein; and such agreement, if made by a licensee of the party sought to be charged, 4. Is valid, unless the authority of the _______ be in writing, subscribed by the party sought to be charged.

1. charged 2. One 3. interest 4. agent

Other types of trade restraint are NOT covered by anti-trust legislation. A reasonable amount of restraint of trade is acceptable under common law. 1. It is not unusual for a seller of a business to enter into a contract agreeing not to compete with the buyer for a given ______ of ______. 2. Partnerships are sometimes dissolved under the condition that the withdrawing partner is not allowed to start a business in competition within a given _____ or ______ from the established business. 3. Employees are often required as a condition of employment to enter into an agreement with the employer that upon termination the employee will not compete by setting up a ______ ______ or got to work for a _______. 4. Employees may agree not to reveal ______ ________ after leaving the company.

1. period of time 2. time or distance 3. similar business, competitor 4. trade secrets

Statutes of Frauds: these laws are based on the general pattern of the ________(year) English statute called the _______ for the ________ of _______ and _________.

1677, Statute for the Prevention of Frauds and Perjuries

Oklahoma Statute, Title 15, Sec. 21B, provides, that liquidated provisions in real estate contracts are valid if the damage penalty does not exceed _____% of the purchase price. If ___% of the purchase price is not sufficient to cover the loss, courts may award damages in excess of the contracted settlement.

5%, 5%

_____-______ laws are designed to maintain and preserve business competition.

Anti-trust

__________ Damages Plaintiffs usually seek money to compensate for harm sustained as a result of a breach of contract. The amount of damages sustained from a breach of contract must be proven within a reasonable degree of certainty, as noted above.

Compensatory

_________ or ________ Damages Damages which a plaintiff seeks in order to recover loss indirectly caused by the breach of contract.

Consequential or Special

The ________ of _______ does not provide a statutory period of time but recognizes an unreasonable delay in bringing action. It will not permit the enforcement of certain legal rights beyond a time determined to be reasonable by reasonable persons in the business.

Doctrine of Laches

Except for contracts for the transfer of interest in real estate, ______ _______ _______ which can be performed within one year are excluded from the Oklahoma Statute of Frauds.

Executory bilateral contracts

A contract which may indirectly aid or contribute to an illegal activity (is OR is not) automatically rendered illegal

IS NOT

_________ of ________ implies that a contract must contemplate a legitimate purpose and must not be contrary to law.

Legality of contract

_________ ___________ : Both parties agree to cancel the contract. The agreement of rescission is in effect a new contract with both parties agreeing to surrender the rights which were established by the old contract.

Mutual Rescission

___________ Damages When a court or jury finds that there was technically a breach of contract in which no significant financial loss was sustained, damages may be awarded in a token amount, such as one dollar. In some situations, courts will conclude that money is insufficient to make all parties "whole" again. Typical equitable remedies include specific performance and rescission of agreements.

Nominal

The general thrust of the ___________ ________ of _________ (Title 15, Sec. 136.5, O.S.) is that certain contracts must be in writing to be enforceable.

Oklahoma Statute of Frauds

The primary purpose of the ________ _______ of _____ is to require reliable evidence that an alleged contract was indeed entered into.

Oklahoma Statute of Frauds

Examples of ______ of ________: Contracts merged or fused into subsequent agreements are discharged by superseding contracts. The time limit for bringing a suit for breach of contract may expire under the statute of limitations, barring the right of action to enforce contractual obligations due to unreasonable delay in seeking action. Unknown and unauthorized alterations made in a written, signed contract can result in its termination. A discharge of responsibility may result from bankruptcy when the court releases the debtor from contractual obligations.

Operation of Law

_____ evidence is not admissible to add to, alter, vary, or contradict in the terms of a written contract. However, when one of the parties contends that part of the writing has been omitted or that part of the agreement has been stated incorrectly, the court will look to the principle of law known as the ________ ________ _____.

Oral parole evidence rule

______ _______ is determined by a judge after oral testimony whether the contract properly reflects the agreement or should be added to or modified per the intentions of the parties.

Parole evidence

_________ ______ or ______ ______, applies only to writings. There can be no application of the _____ _______ _____ unless there is a written contract in which the parties intended to integrate all the terms of their agreement.

Parole evidence, oral evidence parole evidence rule

_________ of ________ means that the parties have carried out the obligations imposed upon them.

Performance of contracts

______ _____ occurs when parties conspire to set prices for rentals rather than let those prices be established through competition on the open market.

Price Fixing

__________ Damages. Where extreme circumstances justify penalizing the defendant, courts sometimes award damages to an injured person which are vindictive and exemplary. The award is not intended to repay the injured party for actual losses suffered but it is designed to punish the perpetrator.

Punitive

___________ of _________ Innocent parties can withdraw from contracts if induced to enter into a contract by fraud or misrepresentation.

Recission of Contract

________ agencies are established in all states to protect the public and to require licenses for the practice of professions.

Regulatory

The _______ _____-______ Act specifically provides that every contract or conspiracy in restraint of trade is declared illegal.

Sherman Anti-Trust Act

A deed transferring title from a grantor to a specified grantee must be in writing, NOT as a requirement of the _________ of _______ but for another reason.

Statute of Frauds

Contracts for the lease of real estate for periods of more than _____ year fall within the ______ of _______.

Statute of Frauds

The _______ of _______ provides that, after a statutory number of years, a definite cutoff point is reached in bringing certain legal actions.

Statute of Limitation

Oral contracts' terms being more easily forgotten and being more susceptible to the perpetration of fraud by one seeking enforcement of a contract or terms that never actually existed was recognized centuries ago in English Law and has evolved into "_______ of _____" being adopted with minor variations in all states.

Statutes of Frauds

The ________ __________ and ____________ ________ _______ (Title 16, Sec 201) provides that, in the absence of an agreement otherwise, the risk of loss does not pass from the seller to the buyer until either legal title or possession has passed to the buyer.

Uniform Vendor and Purchaser Risk Act

________ ________ and _______ ______ : the act covers situations in which all or a material part of the property is destroyed or is taken by eminent domain.

Uniform Vendor and Purchaser Risk Act

_____ is usually prohibited by statute, whereas a good faith transaction of the commodity market is legal.

Wagering

________: to create speculative risks where no risk previously existed.

Wagering

When a tenant has an unexplained absence from a leased space for a reasonable period of time after default in the payment of rent, the lease may be presumed __________ and the terms of the contract breached, the leasehold contract has been terminated.

abandoned

If the new agreement is reached after the original contract has matured or after breach of the original contract, the new agreement is called an _________.

accord

When both parties desire to alter, or amend the original contract rather than put an end to it, they may resort to an "__________ and ________" which is similar to creating a substitute contract.

accord and satisfaction

The rationale for contract damage _______ is that parties are entitled to damages for their loss of expectancies.

awards

Uniform Vendor and Purchaser Risk Act Once title or possession has passed, the _______ is responsible for subsequent losses.

buyer

Unforeseen developments, such as great expense, injury or loss for the promisor can lead to __________, as well as when the benefits of the promise have little or no further value.

cancellation

The broad classes of damages awarded by courts as remedies for breach of contract injuries are ___________, ________ (special), _________, _________, and _______.

compensatory, consequential (special), liquidated, punitive and nominal

The most common means of termination of contracts is _______ and literal ______ of the contractual duty in full.

complete, performance

In general, agreements involving ________ of ________ are illegal unless there is a full disclosure and the other parties effectively consent.

conflict of interest

A _______ is a wrong to the public, whereas a ________ is a wrong or injury to an individual or individuals.

crime, tort

A ________, although a contract, is not making a promise. It actually transfers the interest and when recorded in the public land records, gives constructive notice of ownership.

deed

In effect, a contract merges into a ________ and ceases to exist.

deed

Unless otherwise provided in a real estate contract, all contract terms are merged into and superseded by the ______.

deed

As applied to contracts, _________ means the termination of a contractual obligation prior to completion of performance according to its terms.

discharge

Depending on the seriousness of the illegality, the courts may not require dismissal, especially if it causes severe penalty to an innocent party. If an agreement is ______, the legal part can be enforced concurrently with the voidance of the illegal part.

divisible

A licensee cannot declare to the lender that the _______ _______ was greater than it truly was, or delay in _______ the ______ _______ so that the assets of the purchaser will be inflated.

earnest deposit, depositing, earnest deposit

When one of the parties encounter exceptional circumstances considered substantial, unforeseen, and unforeseeable, the contract cannot be enforced. If the problem could have been anticipated, the obligation is legally _________.

enforceable

In Oklahoma _______ clauses are prohibited by statute in residential lease agreements.

exculpatory clauses

Provisions of a lease exonerating a landlord from liability for injuries caused to the tenant by the landlord's own negligence are known as ___________ ________ and are contrary to public policy.

exculpatory clauses

If an oral contract is fully __________, both parties having completed their required performances, the contract may not be set aside. It is a closed deal.

executed

To prevent injustice which can arise from the misuse of the writing requirement and to avoid unjust enrichment in statute of frauds cases, an _________ (performed) contract cannot be reopened because it failed to comply with all provisions of the statute.

executed

If a group of real estate brokers creates a ______ ______ of commission rates to which all must adhere, there is a violation of the anti-trust laws.

fee schedule

The general rule is that a contract must be legal in its ________ and _______.

formation and operation

Agreements to allocate the sales market and/or set commission rates are direct _____ ________ of trade.

illegal restrains

When the personal interests of the licensee are enhanced in the transaction, it is considered _________ or __________ and against _______ _______.

immoral, unethical, public policy

Should the contractor delivering personal services die or have an incapacitating illness before the performance was due or completed, the contract could be discharged on the grounds of _________.

impossibility

Performance may also be excused where the fulfillment of the contract has become _________.

impractical

Examples of ________ conveying an "______ in _______" are mortgages, easements, contracts to purchase or to sell, contracts or the exchange of real estate, contracts for deed, options, and leases (unless the lease is within a statutory exception for short-term leases).

instruments, "interest in land"

So far as real estate licensees are concerned, the two main classes of contracts covered by the statute are contracts for the sale of an _________ in ______ and _______ not performable within a _____.

interest, land, leases, year

Since all preliminary negotiations are merged with a final unambiguous contract, the ________ _________ best expresses the intent of the parties.

last writing

Sometimes contracts are discharged by ______ without regard to the will of the parties.

law

The most commonly sought remedies in lawsuits for breach of contracts are ________ remedies (damages) and _______ remedies (specific performance and recission).

legal, equitable

It is difficult and impractical to accurately predetermine _______ damages. If the damages agreed to in the contract are excessive, the __________ damages clause is unenforceable.

liquidated, liquidated

A lease entered into on July 1 for one year, beginning July 3, is a ______-______ contract as it cannot be performed within a year of its making.

long-term

If the performance of the contract cannot conceivably occur within one year, the contract is ____-____, covered by the _______ _________ of _______, and needs to be evidenced by a _______ to be enforceable.

long-term, Oklahoma Statute of Frauds, writing

Oklahoma statutes provide, in the absence of contractual agreement, for placing the burden of _______ when a building under contract or sale is destroyed.

loss

The one-year period begins with the time the contract is ________, not the time it becomes _______.

made, effective

A broker cannot be a party to naming a false consideration by accepting an earnest deposit in the form of a check while agreeing not to deposit it in an attempt to mislead the _______ ______ as to the financial resources of the buyer.

mortgage company

A _________ is the substitution of a new party who assumes the responsibilities of the old party releasing the other from the obligation.

novation

An alternative to mutual rescission is _______.

novation

The _______ of a contract refers to the action the contract requires the parties to take or not to take.

objective

Due process is always provided, but circumstances surrounding the contract may result in its cancellation by _________ of _______.

operation of law

Any modifications of contracts falling under the provisions of the Statute of Frauds must meet the requirement of the statute to be enforceable. If the parties mutually wish to cancel an enforceable contract in whole or in part, however, an _______ agreement can rescind any written contract.

oral

When parties to an ______ contract are in full agreement on all terms, the contract is binding and enforceable in the courts.

oral

The purpose of ________ ________ is to assure the certainty and security of transactions by giving binding effect to a final expression of an agreement. It is used to determine whether the writing was complete and intended statement of the contract.

parole evidence

If the portion of a contract unfulfilled was a _________ performance, there can be damages for its partial breach.

promised

The acceptance by both parties of a new contract in place of the old is called a _________.

satisfaction

Since the law DOES NOT usually count fractions of days, a one-year lease entered into on January 1st would begin on January 2nd and run through January 1st of the following year is still a ______-_______ contract.

short-term

If the seller wants any of the terms of the contract to continue and survive the deed, a ________ __________ ________ must be inserted in the deed.

special survival clause

Based on the premise that no two pieces of real estate are exactly alike, the doctrine of _________ __________ requires performance in strict accordance with the terms of the contract.

specific performance

To use ________ _________ as a remedy, the plaintiff must show that the contract as to the defendant is just and reasonable.

specific performance

If the contract is required to be completed "to the satisfaction" of the other party and the "satisfaction" can be measured objectively, a contract may be considered performed when performance meets the objective _________.

standard

Justice does NOT demand complete, literal fulfillment of all conditions, only _______ fulfillment.

substantial

If the other party will agree to voluntarily make certain changes in the contract, a _________ contract will replace the old one. The contract should be re-drafted and signed by the parties involved.

substitute

If the contract calls for something to be done after the closing, such as a roof repair, the requirement would usually _________ the deed and be ________.

survive, enforceable

Many contract forms will include the words "_______ if of _____" which means legally that strict adherence to the time provision of the contract can be, but not necessarily will be, enforced.

time is of essence

It is illegal (Commission Rule 605-10-17-5 (1) (4)) to have ________ contracts between the buyer and the seller for the same property with each contract containing different terms, with the intention of submitting a fraudulent contract to a lending institution to induce a larger _______. Such _______ contracts make the licensee participant a party to _________ ___________ and subject to censure as well as to civil damages.

two, loan dual contracts, fraudulent collusion

Although there is NO LEGAL DEFINITION of __________, it is a legal doctrine whereby a court will refuse to enforce a contract that is grossly unfair or unscrupulous at the time it was made.

unconscionability

Even though an __________ agreement does not constitute fraud or some other traditional variety of illegal conduct, if it is offensive to the public conscience, it may be held illegal.

unconscionable

Courts may refuse to enforce a contract when there is evidence of _______ __________ exerted upon the principal or the beneficiary on the part of the ___________.

undue influence, licensee

Under Statutes of Frauds, an oral contract for sale of real estate falling within the scope of its provisions is ____________, not ______ or _______.

unenforceable, void or voidable

When performance once sought by an obligee is no longer of _______ to the obligee, cancellation of the contract may be sought. Even though the performance is possible and legal, changed circumstances no longer provide the purpose intended causing _________ of ________.

value Frustration of purpose

Another general rule is that if part of a contract is illegal, the illegal part taints the whole agreement and causes it to be ________.

void

Statutes in all states prohibit ______.

wagering

If one party voluntarily relinquishes a right under contract to require complete performance, strict performance has been _________, relieving the obligator of the ________ obligations.

waived, waived

Words hand written on a printed form _____ _____ over contradictions in the printed matter.

will prevail

A contract for the sale of real property, or which will affect any ownership rights or interest therein, mut be evidenced by a __________ to be enforceable.

writing