California Real Estate Principles - Unit 7

unilateral contract

A contract that contains a promise of performance by only one party that is accepted by performance of the other party.

oral contract

A contract that is not in writing; because the statute of frauds requires a written agreement in certain cases, such as an agreement for the sale of real estate, an oral contract may not be enforceable.

actual fraud

A deliberate misrepresentation or a representation made in reckless disregard of its truth or falsity; the suppression of truth; a promise made without the intention to perform it; or any other act intended to deceive.

affirmative fraud

A deliberate statement of a material fact that the speaker knows to be false and on which the speaker intends another person to rely to his detriment.

exchange

A means of trading equities in two or more real properties, treated as a single transaction through a single escrow.

emancipated minor

A person under the age of 18 who is married, in the military service, or determined by a court to be legally able to enter into a contract as an adult.

minor

A person younger than 18 years of age.

negligent misrepresentation

A representation made carelessly that turns out to be false.

option

A right given for a consideration to purchase or lease property on specified terms within a specified time, with no obligation on the part of the person receiving the right to exercise it.

statute of frauds

A state law requiring certain contracts to be in writing and signed before they will be enforceable, such as a contract for the sale of real estate.

contract

A written or an oral agreement to do or not to do certain things. There may be an express agreement of the parties or a contract may be implied by their conduct. A unilateral contract imposes an obligation on only one of the parties, whereas both parties to a bilateral contract have an obligation to perform. A contract is executory when a contract obligation is to be performed in the future, and executed when all obligations have been performed and the contract transaction has been completed. A real estate contract must be a signed writing made by competent parties, for valuable consideration, with an offer by one party that is accepted by the other.

bilateral contract

Agreement in which both parties make a promise to do something or to refrain from doing something and both are obligated to fulfill the promise.

mutual consent

Agreement of all parties to the specified terms; requirement for a valid contract.

implied contract

Agreement that can be established from the conduct of the parties rather than an express agreement.

mutuality of contract

Agreement that imposes obligations on both parties.

executory contract

Agreement with terms that have not yet been completed.

specific performance

An action to compel a breaching party to adhere to a contract obligation, such as an action to compel the sale of land as an alternative to money damages.

reformation

An action to correct a mistake in a contract, deed, or another document.

discharged contract

An agreement that has been terminated, whether by performance of its terms; rescission of the parties; release by one party at the request of the other party; formation of a new contract called a novation; change in the terms of the agreement, called a reformation; assignment of the contract to a new party; or breach by one of the parties by failure to fulfill the terms of the agreement.

liquidated damages

An amount agreed on by the parties to be full damages if a certain event occurs.

tender

An offer to perform a contracted obligation.

counteroffer

Any change to the terms of an offer, made in response to it.

constructive fraud

Any representation made without a deliberate intent to deceive.

consideration

Anything of value given or promised by a party to induce another to enter into a contract; may be a benefit conferred on one party or a detriment suffered by the other.

revocation

Cancellation of an offer before acceptance.

lawful object

Contract performance that does not violate any laws; requirement for a valid contract.

void contract

Contract that has no legal effect from its inception.

voidable contract

Contract that may be disavowed by one or both parties based on circumstances.

valid contract

Contract which meets all of these required legal elements: legal capacity, offer and acceptance, lawful object, consideration, and in writing.

unenforceable contract

Contract which, if enforced, would violate law.

negative fraud

Deliberate concealment of something that should be revealed.

fraudulant misrepresentation

Deliberate intent to deceive; fraudulent misrepresentation of a material fact in a real estate transaction is grounds for a legal action that may result indamages or rescission.

Natural Hazard Disclosure Statement

Document indicating property location in a hazardous area that must be provided by seller to buyer in California residential transactions of one to four dwelling units, with certain exceptions. Information is available at http://Ceres.CA.Gov/Planning/NHD.

impossibility of performance

Event, such as destruction of property, that makes it impossible to perform a contract on its terms.

commercial frustration

Excuse for failure to perform contract obligation because of changed circumstances that make a purchase uneconomic; also called impracticability of performance.

default

Failure by one of the parties to a contract to fulfill one or more of the obligations imposed by the contract.

real estate purchase contract and receipt for deposit

Form of real estate sales contract commonly used in California.

statute of limitations

Law that stipulates the specific time period during which a legal action must be brought following the act that gives rise to it.

performance

Obligation to be performed under the terms of a contract.

assignor

Party making an assignment of rights to someone else.

assignee

Party to whom an assignment of rights is made.

legal capacity

Person who is an adult or emancipated minor and mentally competent to enter into a contract.

rejection

Refusal to accept an offer.

release

Removal of part of a contract obligation, for consideration, by the party to whom the obligation is owed; removal of part of a property from a lien on payment of part of the debt owed.

offer and acceptance

Required for a valid contract; an offer by one party that is accepted by the other.

impracticability of performance

See commercial frustration. (Excuse for failure to perform contract obligation because of changed circumstances that make a purchase uneconomic; also called impracticability of performance.)

express contract

See express agreement. (An agreement established by written or oral communication of the parties that both parties acknowledge as their intention.)

contractual obligation

The agreed-on performance by one of the parties to a contract.

rescission

The cancellation of a contract and restoration of the parties to the same position they held before the contract was formed.

breach of contract

The failure of a duty imposed by law or by contract, either by omission or commission.

offeree

The party to whom an offer is made.

offeror

The party who makes an offer.

novation

The substitution or exchange of a new obligation or contract for an old one by mutual agreement of the parties.

assignment

Transfer of rights from one party to another, usually for compensation.

undue influence

Use of a fiduciary or confidential relationship to obtain a fraudulent or an unfair advantage over another's weakness of mind, distress, or necessity.

executed contract

Written agreement that has been signed by all parties; agreement that has been completed according to its terms.