Section 9: Contract Types and Maryland's Statute of Frauds

Unit 1 Exam: Which of the following is a contract that exists based on an understanding or assumption, rather than on specifically defined terms? Express contract Implied contract Invalid contract Unilateral contract

Implied contract

Breach of Contract Remedies: Accept

Accept partial performance: Although you haven't met all of your obligations, I'm willing to move forward with the contract anyway. Liquidated damages: Things just aren't working out, so I'm going to cut my losses and accept liquidated damages per our agreement because you didn't hold up your end of the deal.

Unit 2 Exam: Grace found herself in a breach of contract situation where the other party met some of the terms but not others. Grace thought it would cost a lot of time and money to sue, so she decided to accept the work that had been done and call it good. This is an example of ______. Accepting partial performance Mutually rescinding the contract Rescinding the contract unilaterally Suing for damages

Accepting partial performance

Unit 2 Exam: Martha made an offer to buy Drake's home, and he accepted it. Under the terms of the agreement, Martha was supposed to make an earnest money deposit of $10,000, but she only put down $5,000. Drake accepted the lesser deposit, and the sale was ultimately finalized. This is an example of ______. Accepting partial performance Rescinding the contract unilaterally Suing for damages Suing for specific performance

Accepting partial performance

Legal Purpose

All contracts must be written for a legal purpose; that is, they must have a lawful objective. A contract for an illegal purpose is void.

Unit 2 Exam: The owner of ABC Construction entered into a contract to build two homes for brothers Jack and John. The contract specified that the homes must be completed by April 1. ABC finished the homes on March 30. Of what is this an example? Non-performance Partial performance Performance Voiding

Performance

Requirement/Not a Requirement: Anytime a licensee helps to prepare an agreement, it must be put into signed, written form.

Requirement This requirement applies to leases as well, regardless of the length of the lease.

Unit 1 Exam: Which of the following requires that contracts transferring ownership of real property be in writing to be enforceable? Code of ethics Fair Housing Act Statute of frauds Statute of limitations

Statute of frauds

Five elements to a valid real estate contract

- Legally competent parties - offer and acceptance - legal purpose - consideration - consent

Offer and Acceptance

. Offer and acceptance occurs only when there is a meeting of the minds, or when the parties are in complete agreement about the purpose and terms of the contract. Most states require that the terms and conditions of the contract be in writing; the wording must express the agreed-upon terms and must be clearly understood by the parties.

Unit 2 Exam: In Maryland, a party to a simple contract has ________ from a contract breach to sue the other party. 30 days 30 years 3 weeks 3 years

3 years

Executory

A contract in progress; one or more terms of the contract remain undone.

Executed

A contract in which all the parties have met all terms of the contract.

Unilateral

A contract in which consideration (such as a promise) is only given by one party to the other.

Invalid

A contract in which one or more of the essential elements is missing.

Consent

A contract must be entered into as a free and voluntary act, without undue influence or duress. Other circumstances that would deprive a party of the ability to consent to a contract include fraud, misrepresentation, and mutual mistake.

Valid

A contract that contains all the essential elements.

Contract under seal

A contract that has a seal certifying its legality. Such contracts require no consideration for them to be legal. 12 years under statue of liitations

Implied

A contract that is based on the actions or behaviors of the parties, not on words.

Unenforceable

A contract that will not hold up in court.

Void

A contract with no legal force or effect.

Maryland Statute of Frauds

A law that requires that certain types of contracts be in writing to prevent injury from fraudulent conduct. To meet the requirements of the statute, the written agreement must: Identify the contracting parties Clearly identify the subject matter of the contract Present the essential terms and conditions of the contract Be in writing

statute of limitations

A law that states that if legal remedy is sought against a person, the pursuer must bring a court action within a specified period of time

Legally Competent Parties

A legally competent party has the capacity (legal and mental) to enter into a contract. If the party does not have legal capacity and enters into a contract anyway, the contract is voidable (not automatically void) by the party lacking the capacity. In the case of a minor entering into a contract to purchase real estate, the minor doesn't have contractual ability due to his age. The minor may hold the adult to the contract, but the adult cannot legally hold the minor to a contract

Bilateral

A mutual contract that involves an exchange of promises or other consideration between two parties.

Express Contract

A stated (written or oral) agreement between two parties to specific terms.

Unit 1 Exam: All of the following are true regarding implied agreements EXCEPT which one? An implied agreement is based on actions or behaviors. An implied agreement is based on a formal agreement. With an implied agreement it is possible that the other party did not intend to be bound. With an implied agreement there is an increased chance of confusion.

An implied agreement is based on a formal agreement.

Unit 2 Exam: Mary agreed to buy her mother's house when her mother planned to move to a senior living community. They signed a purchase agreement, but when Mary had to move because of work, she signed her rights in the contract over to her sister, Tina. Mary may still owe money if Tina can't come up with the agreed-upon funds. What's happening in this scenario? Assignment Breach Novation Performance

Assignment

Consideration

For a contract to be legally binding, an offer and an acceptance must be supported by consideration. Consideration is defined as something of value offered by both parties. Consideration can include: Money (or promises of funds in the future) Property (real estate or other personal property) Labor, love or good wishes or physical actions (non-monetary)

To meet the requirements of the statute of frauds, an agreement must clearly identify the contract's subject matter, present the contract's essential terms and conditions, and ______ to be enforceable. Achieve a result that's fair to all parties Be agreed to verbally Be reviewed by an attorney Identify the contracting parties

Identify the contracting parties

If two parties enter into a contractual agreement with each other to perform an illegal act, which of the following statements is true of the contract? It is voidable, because Jesse is not mentally competent to sign a contract. It is voidable, because Jesse probably signed it under duress. It is voidable, because the consideration, as a percentage rather than a dollar amount, is not clearly stated. It is void because it is not for a lawful purpose.

It is void because it is not for a lawful purpose.

Timeliness

Most real estate contracts contain the phrase "time is of the essence" to prevent unnecessary delays to the process which may harm the parties. Time is of the essence means that the parties are agreeing to proceed in good faith and not unduly delay the process.

Unit 2 Exam: Sam entered into a contract to sell his home to Gina. After the inspection, Gina insisted that Sam replace the damaged roof. Sam refused, and the parties agreed to cancel the deal. This is an example of ______. Accepting liquidated damages Accepting partial performance Mutually rescinding the contract Unilaterally rescinding the contract

Mutually rescinding the contract

Requirement/Not a Requirement: All transfers of real property in Maryland must be in writing.

Not a requirement Tenancy at will can be conveyed through an oral transfer of interest that is for more than one year

Requirement/Not a Requirement: All leases, regardless of term length, must be in writing to be enforceable.

Not a requirement he requirement for leases is that if they are for one year or less and not prepared by a real estate licensee, they do not have to be in writing to be enforceable.

Which element of a valid contract is established by getting the signatures of all parties? Competent parties Consideration Lawful objective Offer and acceptance

Offer and acceptance

Partial performance of a Contract

Partial performance occurs when a party does some, but not all, of what the party has agreed to do.

Unit 2 Exam: Sue Ellen has a contract to buy Roger's house, which she has always admired, when Roger decides he's ready to move to a senior living community. After Roger finds a suitable senior apartment and moves, Sue Ellen writes a check for the agreed-upon amount, and Roger transfers the deed to her. What is happening in this scenario? Assignment Breach Novation Performance

Performance

Requirement/Not a Requirement: Under a tenancy at will, landlords are required to give their tenants 30-day's notice to vacate the property.

Requirement Some Maryland counties require longer notice be provided.

Requirement/Not a Requirement: All contracts for the transfer of any interest in real property for three years must be in writing and signed by the parties to the contract.

Requirement This is a requirement for all contracts that are longer than one year, so this requirement would definitely apply to a three-year contract.

Unit 1 Exam: Which of these situations represents a unilateral contract? Cain sells Trenton his bike. Maurice promises Shelton $100 if Shelton will sell his painting. Shelton agrees, but Maurice doesn't pay Shelton. Nathan and Sue exchange vows at their wedding. Sherry promises to give Brent a ride home from work, and then doesn't show up.

Sherry promises to give Brent a ride home from work, and then doesn't show up.

Maryland Statute of Limitations

Simple contract: 3 years Contract under seal: 12 years

Breach of Contract Remedies: Sue

Sue for monetary damages: All right, then. If you don't want to fulfill your obligations through actions, with the court's help, I'll take out what you owe me in cash and call it even. Sue for specific performance: Hold on just a minute! You're not getting off that easy. With the help of the courts, I'm going to make sure you fulfill the terms of our contract.

Unit 2 Exam: Which one of the following statements is true regarding a partially performed sales contract that otherwise contains all of the essential elements? The contract can't close. The contract is unenforceable in court. The contract is void. The contract is voidable.

The contract is voidable.

If a minor enters into a contract with an adult, which of the following is true? The adult may legally hold the minor to the contract, but the minor cannot legally hold the adult to the contract. The contract is valid, and both the minor and the adult may legally hold the other party to the contract. The contract is void, and neither the minor nor the adult may legally hold the other party to the contract. The minor may legally hold the adult to the contract, but the adult cannot legally hold the minor to the contract.

The minor may legally hold the adult to the contract, but the adult cannot legally hold the minor to the contract.

Unit 1 Exam: You receive an offer in the mail that says you're eligible to win a cash prize if you place some stickers on a form and return it to the sender. What type of contract is this? Implied contract Invalid contract Unenforceable contract Unilateral contract

Unilateral contract

Breach of Contract Remedies: Terminate

Unilateral rescission: Fine, if the other party is not going to meet his obligations, I'm going to terminate. Mutual rescission: Okay, this contract isn't working out for either of us. Let's put it in writing that we've agreed to call it quits.

Breach of Contract

occurs when one party fails to meet the obligations of the contract. When a breach occurs, the innocent party can terminate the contract, the guilty party can terminate the contract with permission from the aggrieved party, or they can mutually agree to rescind the contract.

Performance of a Contract

to meet all terms of the contract. It is possible to partially perform a contract. Partial performance occurs when a party does some, but not all, of what the party has agreed to do.

Assignment of contract

to substitute a new party for one of the original parties stated in the contract. Original person on contract is responsible if assigned person backs out Often done for investors, celebrities, etc

Novation of contract

when a new contract is substituted for an old one between the same parties

Which of the following best describes a bilateral contract? A contract for which one or more terms has yet to be completed A contract in which only one of the parties offers consideration A contract that involves an exchange of consideration between two parties A contract that is enforceable by law

A contract that involves an exchange of consideration between two parties

Voidable

A contract that may be cancelled by one or more parties for one of several reasons. It may be missing an essential element and thus invalid; it may contain a mistake or a misrepresentation, or it may have been created or executed by a party under duress.

Enforceable

A contract that will stand up in court.

Novation of parties

The rights and obligations of an original party to an existing contract are taken by another party, creating a new contract. ie. I buy a house, decide I don't want it, Morgan buys it with the exact same terms

Unit 1 Exam: You're talking to a co-worker at lunch and she mentions she has a box of baby clothes her kids have outgrown that she needs to get rid of. You have a baby on the way, so you offer to pay her $25, and she agrees to bring the box to work the next day and give it to you. Which of the following is true in this situation? This is an express contract because you defined in words the specific terms of the agreement and consideration to be exchanged. This is an implied contract because it is not written down and nobody signed anything. This is an invalid contract because it is not written down and nobody signed anything. This is a unilateral contract because only one party is providing anything of value.

This is an express contract because you defined in words the specific terms of the agreement and consideration to be exchanged. An express contract is one in which the terms of the agreement and consideration to be exchanged are defined in words, whether orally or in writing.