Real Estate section 6 review

Hannah wasn't able to get the financing to open her boutique, so her mother became a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?

Indemnification explain: Indemnifying one of the contract parties releases that party from all liability or loss.

A legally competent party means that an individual has the capacity, legally and ______, to enter into a contract.

Mentally

Statute of limitations clause

States the time frame in which a party can file a lawsuit relative to the contract.

legal purpose

The purpose of the contract must be legal and not against public policy. Ex. Because Mario wasn't actually the legal owner of the property that he'd swindled from another person, the contract to sell the property to Marissa lacked legal purpose and was unenforceable.

novation

The substitution of a new contract for a prior contract, or a new party for an old party Ex. The Silvermans were ready to buy Tina's house when Ms. Silverman got a job transfer. They terminated their contract with Tina. Then Ms. Silverman fought for and earned the right to telecommute, so the contract was back on. Because the deadlines had passed, a new contract was created, which is the novation of their former contract.

A buyer has signed an option agreement, which is an offer to purchase a specific piece of real estate without the obligation to buy it. Until the buyer exercises the option to buy, only the seller is bound by the option agreement; the seller may not sell the property to anyone else during the option period. What type of contract does this describe?

Unilateral explain: A contract in which consideration is only offered by one of the parties is a unilateral contract. In other words, the consideration only goes one way.

executory contract

A contract that has not yet been fully performed.

voidable contract

A contract that may be legally avoided at the option of one or both of the parties.

breach of contract

A failure to perform, as promised, at the time the performance was due.

What's a Legally Competent Party?

A party who has the legal and mental capacity to enter into a contract

A buyer backed out of a deal, and the seller kept the earnest money deposit. What is this an example of?

Accepting liquidated damages

Choice of law

Describes the law under which the contract will be interpreted

When a buyer is taking possession of their new home, what type of contract must they have?

Executed

Uniform Electronic Transaction Act (UETA)

Gives electronic signatures and documents the same legal weight as paper writings and signatures

Five elements are required for a valid contract:

Legally competent parties Offer and acceptance Consent Legal purpose Consideration

After entering into a contract, an inspection revealed that the property has extensive roof damage. The seller declined to fix it, so the parties agreed to cancel the deal. What is this an example of?

Mutually rescinding the contract

When a contract has been breached, the wronged party may attempt to sue for punitive damages, which are ______.

Payments in excess of any compensatory damages

A buyer had a contract to buy a property. The buyer paid the agreed-upon amount, and the seller transferred the deed. What happened in this scenario?

Performance

If a buyer agrees to pay earnest money and have the property inspected within a certain time period and does so before the time period expires, what action has happened for this part of the contract?

Performance

In a contract, consideration is the giving of ______.

Something of value in exchange for something of value

Time of performance clause

Specifies the date by which performance of the contract needs to be completed.

Severability Clause

States that the contract's terms are independent of one another

After closing, the seller refused to deliver the title. The buyer met all of the obligations outlined in the written contract the two parties signed, so the buyer took the seller to court to force the seller to deliver the title. What is this an example of?

Suing for specific performance

consideration

The giving of something of value, which can include the agreement to not do something. Consideration is a required element of a binding contract. Ex. Carly is a buyer and Wade is a seller. Carly gives Wade earnest money and a promise to purchase his property. This is her consideration. Wade's consideration to Carly is his agreement to sell his property.

Gail was supposed to close on her new home by the end of May, but she kept asking the sellers if they could push the closing date back. Soon the summer was over, and she still hadn't closed. Gail was guilty of not adhering to which aspect of the contract?

Time is of the essence

If a party to a contract signs a contract with a buyer for a sale of property the "seller" doesn't legally own, what type of contract is this?

Void

assignment (contracts)

When a new party to a contract agrees to satisfy the former party's obligations. Unless there is a novation (a new contract) the original parties remain liable for the contract terms. Ex. Ty decided to take an African Safari in the middle of his transaction. His brother agreed to have the contract assigned to him. However, Ty remains responsible unless a new contract is drawn up, naming his brother as the contracted party.

performance of a contract

When all contract terms and conditions have been met

Bilateral Contract

promise for a promise

Unilateral Contract

promise in exchange for an act

A minor who enters into a contract with an adult to purchase real estate may hold the adult to the contract, but the adult can't legally hold the minor to the contract. True or False?

true

Rex needs to handle some money he acquired during an "unsavory" business deal. He agrees to sign his boat over to his colleague, Ben, if Ben can launder the money and return it to Rex as part of a legal business deal. What kind of contract do Rex and Ben have?

void

Sylvia, who's 15 years old, and her neighbor Marge, who's 24, sign an agreement that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

voidable

Arbitration

Indicates that legal disputes are to be solved through arbitration

Executed Contract

A contract that has been completely performed by both parties.

valid contract

A contract that results when elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present.

liquidated damages clause

Allows the aggrieved party to recover damages

What's the key difference between assignment and novation of a contract?

Novation releases the original party from all obligations, while assignment does not.

rescission

To take back, remove or annul Ex. Because Brent did not live up to his obligations under the sales contract, the other party rescinded its acceptance of his offer.

offer and acceptance

Two essential components of a valid contract; a "meeting of the minds." Ex. When a buyer agrees to buy and a seller agrees to sell and all terms are agreed to, this is an offer and acceptance.