Chapter 6 Law of Contracts

A minor who enters into a contract has the right to disaffirm it until the minor reaches majority age. Yet, any person who enters in a contract with a minor does not have the right to void it based on the person being a minor. If the minor chooses to go through with the contract, it is binding. What is the age of majority in CA?

18 OR any married person even if under the age of 18

What is the difference between a bilateral and unilateral contract?

A bilateral contract is one in which both parties promise to perform their respective parts of an agreement in exchange for performance by the other party. In a unilateral contract, only one party promises to do something, provided the other party does something. The latter party is not obligated to perform any act, but the promising party must fulfill the promise if the other party chooses to perform.

What is an example of a breached bilateral contract?

A bilateral contract might be broken if a coworker refuses to complete his or her portion of a job; when an employee does something prohibited by his or her job contract; or even when a customer prevents the contractor from satisfying the obligation or finishing the project at hand.

What is the difference between a competent and incompetent party?

A competent party has the legal capacity to enter into a contract and may be held to the promises made in the agreement. An incompetent party may not be held to the terms of the contract.

Who may a contract be signed by?

A contract may be signed by a guardian, an authorized officer of a corporation, an attorney-in-fact, or the contracting party.

What is a valid but unenforceable contract?

A contract that was stated orally and not in writing Ex. An oral long-term lease and an oral real estate sales contract

What is an express contract?

A contract where all terms and covenants of the agreement have been clearly stated and agreed to by all parties, whether verbally or in writing.

What is an unenforceable contract?

A contract which cannot be enforced in a court of law. This could happen because the terms of the contract are ambiguous, if one party has a voidable contract, or if the Statute of Limitations has expired. The Statute of Limitations requires that lawsuits be filed within a certain period of time following a breach. Ex. Investor Bill bought a property from Barry through a written contract for sale. Seven years after the purchase, Barry wanted to claim that the contract was unenforceable. The Statute of Limitations for written contracts in California is four years and Barry would not be able to challenge the contract.

What is an example of performance?

A homeowner enters into a contract with a flooring company to have wood floors installed in his or her home. The company agrees to install certain materials within a certain timeframe and the homeowner agrees to pay a certain price at various stages of installation. Each party signs and the contract is dated. The homeowner and the company now must perform according to contract.

What is the difference between a legal benefit or a legal detriment?

A legal benefit provides something to a party that he or she was not previously entitled to, and a legal detriment is something a party will do that he or she was not previously obligated to do.

A real estate contract that transfers property or any interest in property must include what?

A legal description including leases, easements, right-of -ways, mortgages, time shares, and of course, sales.

What is the most common written express contract between an agent and a home seller?

A listing agreement

Why can impossibility make a contract unenforceable?

A situation beyond the parties' control that makes the transaction impossible or exceedingly difficult or expensive to close may be unenforceable. Ex. Sale of a home that was destroyed by a tornado while the buyer and seller were under contract. No one is at fault for the tornado, so the seller can't be blamed. But because the home no longer exists, it can't be sold.

What is an example of forbearance?

A tenant signs a lease for an apartment and agrees not to redecorate without management approval, not to park in driveways, not to leave trash on the sidewalk, and so on. The landlord agrees not to enter the apartment without appropriate notice. The tenant and the landlord must refrain from doing these things according to the lease contract.

What is a valid contract?

A valid contract is one that is legally enforceable by virtue of meeting certain requirements of contract law. If a contract does not meet the requirements, it is not valid and the parties to it cannot resort to a court of law to enforce its provisions.

What is the definition of a contract?

An agreement between two or more parties who, in a "meeting of the minds," have pledged to perform or refrain from performing some act.

What is an example of a breached unilateral contract?

Any situation in which the person promising to pay in exchange for a completed act refuses. For example, if $100 is offered for the return of one's dog, but then the dog owner refuses to pay thinking the person who brought the dog back stole the dog, the dog owner would likely be in breach of contract because of the broken promise to pay.

Is a lease a bilateral or unilateral agreement?

Bilateral. Both the tenant and the landlord agree to perform certain things.

What is contract law?

Consists of both common law and statutory rules that govern the creation, interpretation, and enforcement of contracts.

What are common contingencies in a real estate purchase?

Financing, inspections and disclosures, and seller providing marketable title.

Most oral contracts are not legally binding but they are undertaken on ethical principles. A contract for sales must be in writing in an amount that exceeds how much money?

In CA anything that exceeds $500

What is consideration mean in a valid contract?

It is the exchange of promises offered by one party to another to do or not do something. Consideration separates contractual obligations from a gift. It is usually something of value being exchanged by one party to receive something of value from the other party. Consideration can be the exchange of money, services, personal property, rights, or the requirement to refrain from doing something. Consideration does not always have to be something tangible.

What is one exception to the statute of frauds?

Leases for one year or less may be oral and are enforceable. However, the most advisable way to conduct real estate transactions is to keep everything in writing.

What does it mean that real estate is non-homogeneity?

No two tracts of real estate are exactly the same. Therefore, a precise description of the location of the land is required so the parties know exactly what property is being transferred from seller to buyer.

What is an executory contract?

One in which performance is yet to be completed. A sales contract prior to closing is executory. While the parties have agreed to buy and sell, the buyer has yet to pay the seller and the seller has yet to deed the property to the buyer.

What is an executed contract?

One that has been fully performed and fulfilled: neither party bears any further obligation. A completed and expired lease contract is an executed contract. The landlord may re-possess the premises and the tenant has no further obligation to pay rent.

What are the reasons a contract may be discharged?

Performance Infeasibility Mutual agreement Operation of Law

In the California's Statute of Frauds in California Civil Code Section 1624, what does it say about contracts?

Some contracts may not be made orally. These are still termed express contracts.

What is mutual agreement and what is it also referred to as?

The full consent of all parties to a contract Also referred as mutual assent

Who is the offeror and the offeree?

The person making the offer is called the offeror and the person with the ability to accept or reject the offer is called the offeree.

What are the 3 scenarios that occur when a contingency is not met?

The transaction is void. A contingency that was not met by the date outlined in the contingency voids the transaction. As agents, this is a scenario you don't want to see happen. Instead, talking with the parties and negotiating could help keep the transaction together. The contingency is waived. The party benefiting from the contingency can choose to waive it even if the condition was not met. For example, if a home sale contingency was not fulfilled, but the buyer wants to remove the contingency and still perform under the contract, he or she can do so. The agreement is revised. If a contingency was not satisfied, the parties can negotiate and revise the original agreement. This often occurs in relation to inspection reports where a buyer may not approve a report and the parties agree to a lower sales price for the property.

How is a contingency removed or satisfied?

This is a critical component, because all too often an agent or buyer satisfies a contingency by being silent when an action was needed to have the contingency removed. This is why it's so important to know how the contingency is to be removed or satisfied to avoid inadvertently satisfying or removing a contingency.

True or False: Consideration is not required to be of equal value, but it always must be legally sufficient.

True; which means consideration must be either a legal benefit or a legal detriment.

Is an option to terminate a bilateral or unilateral agreement?

Unilateral. This agreement binds the seller and prevents the seller from selling to another party, but the buyer is not bound to purchase the property during the term of the option.

What does execution for a contract mean?

When both parties have completed their obligations. In the case of a real estate contract, that milestone comes at closing. Until payment and title change hands, the contract is merely "executory", capable of being executed.

Which contracts must not be state orally?

1. A contract for the sale or interest of real estate. 2. An agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate. 3. A lease of real estate for a term longer than one year. 4. A special promise to answer for the debt or default of another. 5. An agreement that is not to be performed within one year from the date of making the agreement. 6. Loan agreements in excess of $100,000 made by financial institutions.

What is important to keep when making an agreement orally?

A party keeps any and all documentation regarding the agreement. Should a party end up in litigation, notes regarding the agreements between the parties, the times such agreements were made, the witnesses to such agreements, and any emails or written correspondence between the parties can be important to proving that a valid contract existed. Even hand written sticky notes become important when trying to prove the existence of an oral contract. Place all information pertaining to the agreement in one place.

What is the definition of a valid contract?

A valid contract is one which meets the legal requirements for validity. A valid contract that is in writing is enforceable within a statutory time period.

What is the legal definition of a competent party?

Addresses age, literacy, mental capacity, existence, and legal authority.

What is a void contract?

An agreement that does not meet the tests for validity, and therefore is no contract at all. If a contract is void, neither party can enforce it. Ex. a contract that does not include consideration is void. Likewise, a contract to extort money from a business is void. Void contracts and instruments are also described as "null and void."

What is the difference between an executory and executed contract?

An executed contract is one that is fully performed at closing. It is done, finished. An executory contract, on the other hand, leaves something dangling-usually the most important item of all, the delivery of a deed. The classic executory contract is the contract for deed (or land sales contact), which provides that the buyer gets title after making payments over a period of years.

What is the difference between an indefinite and ambiguous contract?

An indefinite contract is one that cannot be fully understood because important terms are missing from the contract. An ambiguous contract contains terms, but the terms are vague or can be interpreted and understood in more than one way.

What are the variety of issues to consider regarding offers and mutual agreement?

An offer must be definite, certain, and clearly understandable. Prior to an offer being accepted by the offeree, the offeror can revoke the contract. An offer is terminated if the offeree rejects the offer or makes a counteroffer. An offer is accepted when the offeree accepts the offer exactly as the offer is conveyed; no terms or conditions can be changed. In a real estate transaction, the parties all provide their signatures as agreement to the written terms of the contract.

What is another reason a contract can be unenforceable?

Because of the Doctrine of Laches. This principal states that a court has determined a contract is unenforceable due to needless delay or neglect in filing a claim even though the Statute of Limitations may not have expired. Ex. Julie bought a house from Craig using a written purchase and sale agreement. After taking possession, Julie discovers a small leak in a pipe in the crawl space of the house, but does not take any action against Craig for three years. The court decided that the contract was unenforceable because of Julie's delay, even though the Statute of Limitations had not expired. The court ruling was based on the Doctrine of Laches.

How does lack of consideration create and unenforceable contract?

Because real estate contracts aren't enforceable unless the parties have exchanged something of value, called consideration. In most real estate contracts, the seller transferring title at closing serves as consideration. A sales contract is unenforceable if the seller fails to turn over the title.

Is a listing agreement a bilateral or unilateral agreement?

Bilateral. Most listing agreements are bilateral requiring the broker to perform certain services and the seller to perform certain responsibilities.

Is a purchase agreement a bilateral or unilateral agreement?

Bilateral. Purchase agreements are always bilateral since they require both parties to perform.

Is Independent Contractor Agreement a bilateral or unilateral agreement and what is it?

Bilateral. This agreement is between a salesperson and sponsoring broker. Upon receiving a salesperson license, a licensee must have a sponsoring broker before beginning to work. This will be an important document. A licensee should carefully read his or her promises and the broker's promises.

Is a Buyer Representation Agreement a bilateral or unilateral agreement?

Bilateral. This defines the obligations and responsibilities of both parties.

What are the common contingencies seen in CA real estate purchase agreements?

Buyer Financing - This contingency gives the buyer time to apply for and obtain financing for the property. This usually includes an appraisal of the home to ensure the property is valued at a specific amount. Home Inspection - A home inspection contingency gives the buyer a specific time to conduct home inspections and allows the buyer to cancel or renegotiate the contract terms based off the inspection results. Sale of Buyer's Property - This contingency gives the buyer time to sell his or her current property before being obligated to purchase another property. Preliminary Title Report - This confirms the seller can transfer clean title to the buyer. Lead-based Paint Disclosures and Inspection - Federal law gives all buyers 10 days to inspect for lead-based paint. Approval of Homeowners' Association Documents - This contingency allows buyers to approve the HOA Conditions, Covenants, and Restrictions.

What are the steps from an executory offer to an executed contract?

Buyers sign and initial a written offer in all required places. The offer is presented to the sellers. The seller agrees to the offer as written. Sellers sign and initial in all required places. Sellers notify the buyer of their acceptance. The effective date is written on the date of notification.

Another example of implied agency could be a result of a previous relationship with the principal. What does this mean?

Buyers who have been clients of a broker may continue to be clients when they subsequently sell a property with the unofficial help of the broker, even though no written listing agreement has been signed.

What is a discharge of a contract?

Cancellation and termination of a contract

What is default and breach?

Default is to fail to do something required by law or duty. California laws protect the rights of parties who have entered into valid contracts. Those who fail to perform are in default and may be sued by the other party. A breach is something torn or broken. In contract law, it means that someone has broken his or her word.

What are some of the ways a contract can be voidable?

Duress Undue influence is similar to duress, but is a lesser degree of severity. Typically it involves one party dominating or controlling the free will of the other party. It's important when evaluating undue influence to look at overall health of a party, age, absence of third-party advice, and the circumstances surrounding the agreement. Fraud or concealment typically occurs when essential facts of the agreement are misrepresented or omitted, or by the falsification of a signature on a contract. Misrepresentation in a contract allows the party to whom the misrepresentation was made to void the contract if he or she wishes. Types of misrepresentation seen in real estate transactions include knowingly giving a false impression about something or blatantly omitting pertinent information that would affect the other party's decision to agree to the contract. This misrepresentation could be from one of the parties in the agreement or an agent. Note - If either party in a real estate transaction suffers a loss because of misrepresentation by a licensee, the licensee loses his or her commission and is liable for damages based off the misrepresentation. Mutual mistake occurs when both parties mistake a material fact. For example, a mutual mistake of fact could be having the incorrect legal description. However, it cannot relate to a mistake related to the law, such as a zoning ordinance.

When can a contract have both executed and executory features?

Ex. when a builder contracts to construct a house in stages, each stage of assembly dependent either upon pre-payment by the soon-to-be homeowner or payment for each completed stage before work on the following stage can commence. Such a contract requires carefully phrased terms that bind the two parties to specific, timely obligations. Each stage of construction, when completed and paid for, forms an executed portion of the contract. Until all conditions have been met - the house finished according to specifications outlined in the contract and the final payment for the work duly rendered - the unmet portions of the contract remain executory.

True or False: Earnest money must be paid to create a valid contract or that it is the consideration.

False; earnest money shows the serious intent of the buyer and may serve as liquidated damages in the event of breach of contract. Liquidated damages are funds paid by the defaulting party to the non-defaulting party according to the terms of the contract.

An agreement is not enforceable if what?

If deliberate deception, fraud, or false information is present

When can a contract become an executed contract directly after the parties have signed it?

If the conditions to be met only await the formality of a completed contract. This often occurs in negotiations between two parties when the seller delivers the product or service and the buyer instantly pays for it. Such simultaneous transactions theoretically do not require a contract; but an executed contract does serve as a record both of the delivery and of the purchase of the product or service.

What is the statute of frauds?

In California requires that all agreements affecting title to or interest in real estate be in writing and signed by the parties. An oral agreement of sale is void and therefore unenforceable. Additionally, all agreements authorizing or employing an agent in real estate must be in writing.

What is performance and forbearance?

In contract language, "performance" means to do what one agreed to do. Some contracts require a party to refrain from doing something and that is called "forbearance". Contracts may include both performance and forbearance requirements.

How does one establish the existence of an implied contract?

It is necessary to show: an unambiguous offer, unambiguous acceptance, mutual intent to be bound, and consideration. However, these elements may be established by the conduct of the parties rather than through express written or oral agreements.

What are the most commonly used real estate contracts?

Listing and representation agreements and real estate purchase agreements

What is another important component of a competent party?

Mental capacity mental capacity is met if the party understands the agreement at the time of entering into the contract.

What are the 2 commonly used types of legal descriptions?

Metes and bounds Reference to a platted subdivision (lot, block, section, and subdivision name)

What is it called when the parties mutually agree to voluntarily cancel a contract?

Mutual rescission

What is the way courts can determine the meaning of a contract if the parties cannot come up with an agreement on the interpretation?

Technical terms are given their technical meaning - no change in the term meaning is permissible. Handwritten content takes priority over typed or pre-printed content, and typed content takes precedence over pre-printed terms. If a provision is missing from the contract, the court will determine reasonable terms and "fill in the blanks". The intent of the parties is used to determine meaning.

What are the 2 differences of a bilateral and unilateral contract?

The number of people or parties promising an action. Bilateral contracts need at least two, while unilateral contracts only obligate action on one part. In unilateral contracts, one offering the deal promises to pay when a certain act or task is complete, but bilateral contracts allow for an upfront exchange.

What is due diligence in fulfilling contingency requirements?

Under California law, all parties to a contract are required to use reasonable due diligence to fulfill contingency requirements. For example, if a buyer with a financing contingency never submits the required paperwork to obtain the loan, the buyer is not using due diligence to satisfy the contingency. In this situation, the court could remove the financing contingency and require the buyer to perform according to the contract (assuming the buyer could actually qualify for the loan). Due diligence protects both the buyer and seller in a real estate transaction.

Is an option to purchase a bilateral or unilateral agreement?

Unilateral. This binds the seller and prevents the seller from selling to another party but does not bind the prospective buyer to purchase.

What are the 4 ways a court may construe the legal status of a contract?

Valid Valid but unenforceable Void Voidable

How is it possible for a listing agreement to be unilateral?

When there is an open listing where a seller agrees to pay one or more brokers depending on who brings a buyer is unilateral. "IF you bring a ready, willing and able buyer, I will pay you a fee."

Is a contract with some legal and some illegal parts valid?

Yes, but only the legal parts are valid and the illegal parts are void

Can bilateral and unilateral contracts be breached?

Yes, consider the term 'breach' synonymous with 'break.' This means breach of contract can be defined as a broken contract, stemming from failure to fulfill any term of a contract without a justifiable, lawful excuse.

Is an illiterate person considered a competent party?

Yes, they just need to have a literate person read the contract and they (the illiterate)can sign it

Should a contingency have a specific deadline?

Yes, without this, the decision of a "reasonable time" for the fulfillment of the contingency is left for a court to decide. It's much better to be clear from the beginning on the exact timeline the contingency must be satisfied.

What are the 6 elements required for a valid contract?

1. Competent parties 2. Consideration 3. Mutual Agreement 4. Lawful Objective 5. In Writing and Signed by the Parties 6. Contain a Legal Description

What are the details to carefully complete to help the parties execute the contract?

1. Don't be fooled by technology: If the contract has gone through several rounds of negotiation and revisions, don't assume that the last circulated "execution copy" is what is correct. Before the contract is signed by all parties, it is the licensee's duty to be one hundred percent sure that everyone understands all the provisions of the contract. 2. Date the contract: While a contract need not be dated to be valid and enforceable, it is kind of foolish to not date a contract. Dating helps to identify a contract years later and puts the contract into chronological context. 3. All parties must sign the contract: The contract is not binding unless signed by both (all) parties. 4. Initial last minute handwritten changes to the contract: Any last minute change to a contract that is done by hand should be initialed by the parties to the contract. However, it is much better to insist on a revised contract or amendment reflecting the change. 5. Check the other party's authority to sign: For example, if the other party to the contract is a corporation, you want to be sure that the corporation is in existence, that the person signing on behalf of the corporation is authorized to do so, and, particularly in larger transactions, that the corporation approved the contract by consent of its shareholders or directors. 6. Get an original executed copy of the contract for company files: Each party should have an original executed copy of the contract for their files. In other words, if there are two parties to the contract, there would be at least three identical executed contracts. One for the buyer, one for the seller, and one for the office. Most licensees make a copy of the office contract to retain in their files.

What is an example of loss of profit?

Often, purchasers tend to acquire real estate hoping to make profits from sale, rental, and/or development. In such circumstances, the purchaser might be able to recover loss of profit in addition to loss of bargain damages and expenses, articulated above. Nonetheless, the purchaser must overcome several obstacles, including but not limited to: Foreseeability: The loss of profit incurred by the purchaser must be foreseeable, i.e. within the contemplation of parties. Reasonable Certainty: The loss of profit must be proven with reasonable, not total, certainty.

The rights and liabilities of parties to a contract may be changed by the application of law. What is this called?

Operation of law

What is the difference between subjective and objective infeasibility?

Subjective infeasibility is due to the inability of the individual promisor to perform, such as by illness or death. Objective infeasibility means that no one can render the performance. The destruction of the subject matter of the contract, the frustration of its purpose, or supervening impossibility after the contract is formed are types of objective infeasibility.

What criteria must be proven to enforce a bilateral or unilateral contract in court?

The contract existed The contract was broken A loss was suffered The person challenged was responsible

What does execution for a document really mean?

The date that it was signed

A property address is not sufficient to transfer property. What must be included?

The exact location and boundaries must be included in the sales contract.

What are examples of Expenses Reliant on the Contract?

The first category is those expenses a non-breaching party incurred in reliance on the contract. Such expenses could include but are not limited to: Seller's Eviction of an Actual Tenant Refurbishment of the Premises in Accordance with Contract's Specifications Broker's Commissions Title Search Examination Fees Surveys Document Drafting Expenses Appraisals Traveling to and from the Property Moving In or Out of the Property Expenses for Arranging Financing

What is the Restatements for the Law of Contracts and was developed by who?

The foundation for the basic principles of contract law as it applies to real estate transactions. Developed by the American Law Institute in 1944

What is a novation?

A complete release from liability

There are situations during a real estate transactions where relationships are not under contractual obligation. What is an example of this?

A listing agent's relationship with a buyer. Since the parties do not have a contractual relationship, one might assume the listing agent does not have any duty to disclose information to the buyer. This assumption would be wrong; the law requires agents to always disclose material facts to third parties or customers. As a reminder, a material fact is anything that a customer would not be able to discover on his or her own and that would change the approach on whether or not to continue with the transaction.

How does the absent of mutual assent create an unenforceable contract?

A meeting of the minds, or mutual assent, means parties freely agree to the terms of the contract, exactly as the contract is written. In cases where there's been a mistake, a misrepresentation, a non-disclosure or fraud, there is no meeting of the minds. Ex. if a seller makes an innocent mistake and discloses that he or she replaced the roof of the home five years ago when he or she actually replaced it seven years ago, this disclosure could render the contract unenforceable because the buyer thinks the roof they are getting is newer than it is. Duress and undue influence also affect assent.

What must happen for a contract to be enforceable?

A party entering into a contract must be identifiable and exist at the time of offer and acceptance. If a contract is accepted and conveyed to the parties and then one of the parties dies, the contract remains enforceable and becomes part of the deceased's estate.

What are examples of unlawful terms?

A residential lease cannot be in violation of Fair Housing Laws. For instance, a lease stating that no children violates the familial status portion of federal fair housing by discriminating against families with children. A real estate listing agreement cannot specify no showings to minorities, as this is discrimination and an illegal act. This would immediately void the agreement. An apartment manager may not lease an efficiency apartment to a single mother with six children. This would violate health and safety occupancy limits.

What are examples of a loss on bargain damages?

A total breach, would encompass the difference between the agreed contract price and the market value of the property on the date of breach. For instance, if a property was sold for $100,000 and at the time of the total breach by buyer, the property was worth $60,000, then the seller - as the non-breaching party - would presumably be entitled to $40,000 in losses. Likewise, if the value of the property had risen to $140,000 on the date of breach, if the seller is in total breach, the buyer is entitled to $40,000.

What is the difference between a voidable and void contract?

A voidable contract differs from a void contract in that the void contract does not require an act of disaffirmation to make it unenforceable.

What is the difference between an expressed and implied contract?

An express contract is one in which all the terms and covenants of the agreement have been clearly stated and agreed to by all parties, whether verbally or in writing. An implied contract is an unstated or unintentional agreement that may be considered to exist when the actions of any of the parties suggest the existence of an agreement.

What is a common example of an implied contract?

An implied agency agreement. For example, in implied agency, an agent who does not have a contract with a buyer performs acts on the buyer's behalf, such as negotiating a price that is less than the listing price. In so doing, the agent has possibly created an implied contract with the buyer, even though unintended. If the buyer compensates the agent for the negotiating efforts, the existence of an implied agency agreement becomes even less questionable.

Who is required to act on a contingency?

The person required to act is usually the party who benefits from the contingency, but that's not always the case. It should be clear if the buyer, seller, a third party (lender or inspector), or more than one party is required to act in regards to fulfilling the contingency. It is vital the wording is clear so all parties understand their responsibility.

What is rescission in contracts?

This is the mutual agreement of discharging a contract

True or False: A real estate contract that is not a personal contract for services can be assigned or delegated to another party

True, but unless the terms of the agreement specifically prohibit assignment or delegation.

What are implied contracts?

Consist of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words. Such contracts are implied from facts and circumstances showing a mutual intent to contract, and may arise by the conduct of the parties. A contract implied in fact is a true contract.

What is a delegor and delegee?

Delegor - A person, company, or entity transferring its duties to another (the delegee). Delegee - A person, company, or entity receiving duties to perform from another (the delegor).

What are real estate contracts?

Legal agreements that underlie the transfer and financing of real estate, as well as the real estate brokerage business.

What are some examples of breach contract damages?

Loss of bargain damages Special damages Expenses reliant on the contract Loss of profit

When and why was the statute of frauds created?

Most states require certain contracts to be in writing and signed by all parties charged in the agreement in order to be enforceable in court. This law goes back to the English law of 1677 known as the Statute for Prevention of Frauds and Perjuries.

In CA, how long does one have to sue for breach of contract according to the statute of limitations?

4 years

What are the reasons that contractual rights are not freely assignable?

1. The rights or duties to be assigned involve the performance of unique, non-standardized personal services; or 2. The assignment would place a significantly greater burden or risk on the obligor in rendering the promised performance; or 3. The assignment is not prohibited by law; or 4. The contract itself prohibits assignment.

What is the difference between assignment and delegation?

Assignment transfers rights and delegation transfers duties.

What is the assignor and assignee?

Assignor - The person, company, or entity assigning its rights to another (the assignee). Assignee - A person, company, or entity receiving rights from another (the assignor).

What does tort law attempt to remedy?

Attempts to remedy a wrong by providing monetary damages to the injured party. Types of damages that may be recovered are pain and suffering, emotional distress, personal property issues, loss of earnings, and reasonable medical expenses. They include both present and future expected losses.

What is the foreseeability test?

Foreseeability in this context means such damages were within the contemplation of the contract when made.

What are the most common tort claims made against real estate agents?

Fraud Breach of Duty Breach of Contract Negligence Bodily Injury / Property Damage Misrepresentation regarding the Condition of the Property Consumer Protection Act Earnest / Escrow Money Dispute Misrepresentation regarding Flooding or Leaks Misrepresentation regarding the value of a property

What is a voidable contract?

Is a contract is one which initially appears to be valid, but is subject to cancellation by a party to the contract who is believed to have acted under some kind of disability. Only the party who claims the disability may cancel the legal effect of the contract. Ex. a party who was the victim of duress, undue influence, fraud, misrepresentation, or mutual mistake in creation of a contract and can prove it may disaffirm the contract. Which must occur during a legal time frame

What is duress when entering a contract?

Is the threat of economic or physical harm. Entering into a contract under duress means that the contracting party is only doing so to avoid the economic or physical harm to either him or herself or a third-party.

What is the law of torts and what is a tort?

Issues involving licensee non-disclosure to third parties Tort is a civil wrong or wrongful act, whether intentional or accidental, that the law recognizes as grounds for a lawsuit. Torts include all negligence cases as well as intentional wrongs which result in harm. Therefore, tort law is one of the major areas of law (along with contract, real property, and criminal law).

What is a common real estate purchase contingency?

It addresses financing. Let's say a sales contract has a financing contingency that states, "buyer to qualify for a loan in the amount of $200,000". In order for the buyer to become obligated to perform according to the contract terms (purchase the home), he or she must actually qualify for the $200,000 loan. Once the buyer has obtained the qualification, the contingency is removed and the contract progresses. If the buyer cannot obtain the loan, the buyer is not obligated to the performance outlined in the sales contract.

What is a breach of contract?

It is a failure to perform according to the terms of the agreement. Also called default, a breach of contract gives the damaged party the right to take legal action.

A document does not have to be in a formal format just as long as it has what certain things?

Names of the parties to the agreement Adequate property description or content of the agreement Terms and conditions of the agreement Shows consideration Is signed by the parties

Even if there is consent for an assignment is the assignor not released from his or her duties of a contract?

No, unless the assignor receives a complete release from liability, called a novation, the assignor would be secondarily liable if the assignee did not perform according to the contract terms.

How does a contract terminate when fully performed by parties and what other ways does performance terminate contracts?

Partial performance. When the defendant has failed to complete performance of an agreement according to its terms, the plaintiff may recover such damages as will compensate him or her to the same extent as though the contract had been completely performed. The customary measure of damages is the reasonable expense of completion. Completion refers to a fulfillment of the same work, if possible, which does not involve unreasonable economic waste. The injured party is not automatically entitled to recover the difference between the contract price and the amount it would cost to have the work completed when a contract is breached after partial performance; he or she will be entitled to recover that amount only if completion is actually accomplished at a greater cost. Sufficient performance, if a court determines a party has sufficiently performed the contract, even though not to the full extent of every provision Defective performance. Damages for defective performance of a contractual agreement are measured by calculating the difference in value between what is actually tendered and what is required as performance under the agreement. If the performance tendered is either of no value or unsuitable for the purpose that the contract contemplated, the proper measure of damages is the sum that is necessary to repair the defect. If a defect can be easily remedied through repairs, the measure of damages is the price of the repairs performed.

What is mutual agreements under the discharge of contracts?

Parties to a contract can agree to terminate, or renounce, the contract. If the parties wish to create a new contract to replace the cancelled contract, they must comply with the validity requirements for the new contract. Such substitution is called novation.

If one is damaged from a breach of contract, what are the following remedies?

Rescission - A damaged party may rescind the contract. Rescission cancels the contract and returns the parties to their pre-contract condition, including the refunding of any monies already transferred. Forfeiture - Forfeiture requires the breaching party to give up something, according to the terms of the contract. For example, a buyer who defaults on a sales contract may have to forfeit the earnest money deposit. Suit for damages - A damaged party may sue for money damages in civil court. The suit must be initiated within the time period allowed by the Statute of Limitations. When a contract states the total amount due to a damaged party in the event of a breach, the compensation is known as liquidated damages. If the contract does not specify the amount, the damaged party may sue in court for compensatory damages. Suit for specific performance - A suit for specific performance is an attempt to force the defaulting party to comply with the terms of the contract. The most common instance is a defaulted sale or lease contract where the buyer or seller wants the court to compel the defaulting party to go through with the transaction, even when the defaulter would prefer to pay a damage award.

What does reformation of a contract include?

Sometimes a contract does not accurately reflect the intentions of the parties because of some mechanical or clerical error in the document. When this happens a legal action called a reformation is necessary to correct or modify the contract.

After the adoption of the United States Constitution, states were given the authority to create their own contract laws, as long as they didn't violate the constitution. However, as commerce increased between states, it became clear that a uniform model for dealing with contracts and sales was needed. What was created as a result of this?

The American Bar Association created the Uniform Commercial Code, or UCC. Most states have adopted the UCC.