contracts2

No one but the offeree can

accept an offer. The acceptance by the neighbor is not valid, no matter how or when it was communicated. It is, in fact, a new offer, which Walton now may or may not accept, as he chooses.

The mailbox rule applies only to

acceptances

A large mirror that a buyer wants to remain with the property should

be identified as a fixture in the sale contract. A fixture is defined as a piece of personal property that stays with the real property. Even though the large mirror might be removable, if it is identified as a fixture and made part of the real estate contract, it will remain after the sale.

A mistake that is mutual, material, unintentional, and free from negligence may cause the contract

to be VOIDABLE> All agents and all parties to a transaction should carefully read all binding documents, as the document is prima facie evidence of the agreement. Having an agent does not relieve the client of responsibility. In this case, it would be voidable by the developer, though he may decide to honor the deal.

subjective intent

what a person is actually thinking

objective intent

what a person says or does

A homebuyer wishes to make an offer on a home, but has little money. On the contract, he puts down $0 as earnest money. Which is TRUE?

when signed the contract is enforceable. There is no requirement for earnest money, although, in practice, it is a good idea. An educated seller or listing agent will probably request it, but it does not affect the validity of the contract.

To be a valid contract

the offeree must communicate acceptance to the offeror before the offeror withdraws his offer. In this question, there was no communication of acceptance and the buyer was free to withdraw the offer and expect the return of the earnest money deposit.

A listing agreement is between

the seller and broker.

Dave is told by his lender that his debt ratio exceeds the limits set by the FHA. Dave was hoping to get financing through the FHA because he has only 5% to put down. On the way to his apartment, Dave sees a sign in a yard that reads "Rent-to-own, credit problems ok." Which agreement is the best fit for Dave's situation?

A purchase agreement would not work unless the buyer was paying cash. In this question, the buyer has only a 5% down payment and would need to rely on a mortgage to buy a property. A net lease is normally used in commercial leases. A life estate is a state of ownership, not a contract. This buyer will best be served by a lease with an option to purchase. Since the buyer will likely reduce his debt to later qualify for a mortgage, a lease for now and the right to purchase it later when the buyer can get a mortgage would be the best option.

A listing is a(n)

A real estate listing is not considered a property owner's offer to sell. A buyer does not create a contract by accepting the seller's listing. A buyer must make a written offer to purchase, which the seller may accept or reject. Or, the seller may agree to enter into an option contract, allowing the potential buyer time to decide if she wants to buy.

A commercial broker listed a storefront for rent. A tenant was procured. After the lease was signed, the owner refused to pay the listing broker. In order to obtain her fee, the broker could

lien the preoperty

Adam and Jenny enter into an agreement wherein Adam will buy Jenny's house at the asking price if Jenny will install a new roof, and if Adam can qualify for a loan sufficient to cover the purchase. Until the roof is installed and the financing obtained, the contract is said to be

An executory contract is one in which the parties have agreed to the terms but conditions still remain to be fulfilled by the parties. Once all conditions are met and all that remains is the closing, the contract is said to be complete (executed). A voidable contract is one that may be rescinded, and a contract that has been rescinded is void.

valuable consideration

Contracts must be supported by consideration, which is offered by one party to induce another to enter the contract. "Valuable" consideration is anything of value: Money, goods, personal services, exchanged property, or often simply the promise to deliver something of value. "Good" consideration consists of "love and affection" and is sufficient to support a gift deed.

not an essential element of contract

Earnest money is not required to form a binding contract. If any earnest money is offered by the buyer or is required by the seller as part of the transaction, the amount of earnest money is entirely negotiable between the parties.

Seller Sam decides to purchase Buyer Bob's home. He submits a written offer, stipulating that time is of the essence and that the offer must be accepted in writing before 12 o'clock noon three days hence. On the third day, at 11:30 a.m., Buyer Bob telephones Seller Sam to say he has decided to accept the offer as written. Do the parties have a binding contract?

If the offer specifies a particular manner of acceptance, the acceptance won't be effective unless those instructions are followed exactly. Until acceptance is communicated properly (in this case, in writing), the offeror can still revoke the offer.

Which is TRUE of a voidable contract?

Only the injured party has the right to void a contract, but is not required to. Reasons might include intoxication, menace or duress, fraud or misrepresentation, or minority status of one of the parties. If the contract is illegal it is void automatically.

Then he addressed it to Mary and went to the post office and mailed it. Is the contract binding on both parties?

The "mailbox rule" says that when an acceptance isn't communicated directly, either in person or over the telephone, it is effective as soon as it is placed in the U.S. mail to the offeror, even though the offeror has not received it yet. The mailbox rule applies only to acceptances, not to revocations. Revocations are not effective until they are actually received by the offeree.

A legal remedy that would compel a vendor to execute a deed pursuant to a valid land installment contract is known as

Specific performance is a remedy available to the buyer that would force the vendor (i.e., seller) to execute the deed and specifically perform the promises given in the land installment contract.

A seller and buyer agree on terms of a purchase and sale agreement, and are now waiting for closing to occur. Unfortunately, before closing occurs, the improvements on the property are struck by lightning and totally destroyed. The buyer may

The buyer may terminate the contract due to impossibility of the seller to perform. If the buyer wishes, she can always accept the remaining property as is. Even though the buyer does not yet have actual title, she has equitable title to the property and may claim any insurance proceeds that relate to the real property damages (but not the personal property of the seller, unless that was also subject to transfer under the contract).

A purchase and sale agreement stipulates the earnest money deposit be placed in a separate interest-bearing account, with any interest earned split between the buyer and seller. This is

The law requires that every broker maintain a special non-interest-bearing trust account to receive client funds tendered to the broker in trust, but does not require that the broker's clients use it as a depository.

good faith deposit form of payment

The parties may agree on any form of payment for a good faith deposit (or earnest money). A good faith deposit is usually a single payment, but the total amount may include several payments, in increasing or decreasing amounts, as the contract progresses toward closing. Or, the deposit may be something of value other than money.

Once both parties have signed a purchase and sale agreement and the buyer's earnest money check is deposited in the broker's special trust account, whose money is it?

Until the offer is accepted, the money is (in a sense) the buyer's. Once the seller accepts the offer, however, the buyer may or may not get the money back, even though the seller will not be entitled to it until the transaction is completed. Since it is held in trust, earnest money never belongs to the broker. The parties, in their sole discretion, can always agree on how they want to handle disposition of earnest money.

The buyer does not sign

a deed

a listing agreement must begin/end

a definite start date and end on a definite date of expiration. A listing agreement is between the broker and the seller, not the agent and the seller. The buyer is not a party to this agreement.

In order to guard against liability, a broker should make sure that specific authority to deposit earnest money in the brokerage's special trust account is contained in what document?

either option or purchase. The agent should not make assumptions, but always make sure the client's instructions (as set forth in the contract) are clearly understood and specifically carried out. Even though the law requires brokers to establish special trust accounts for handling earnest money, the client and/or customer may agree on some other method of handling it.

Bilateral contracts

impose an obligation on all parties to the agreement to perform.

If the buyer in contract for deed (land contract) who has paid less than 20% of the purchase price defaults, the seller may

initiate forfeiture. If the land contract has been in place for less than five years, or the amount paid by the buyer is less than 20% of the purchase price, the seller may initiate forfeiture proceedings 30 days after giving the buyer notice of default and intent to sell. After receiving notice of default, the buyer has 10 days to remedy the default and restore terms of the contract. After the 10-day redemption period has run, the defaulting buyer loses all rights to the property and the seller can re-sell it. If payments have been made totaling more than 20% of the purchase price, or if the contract has run for longer than five years, foreclosure proceedings are required. Judgment liens are involuntary financial encumbrances recorded against the title to real property.

An option contract

is a unilateral contract.

An express contract

is an agreement that has been expressed in words, either spoken or written.

An implied contract

is an agreement that has not been put into words, but has terms implied by the actions of the parties. Melissa expects her coat to be professionally cleaned in a timely manner and the dry cleaner expects to be paid for its services. A unilateral contract binds one party but not the other. An executed contract is one that has been completed--all parties have performed as required. A complete contract is one in which each party to the contract specified its respective rights and duties for every possible scenario. These are very costly and time-consuming to produce, and therefore most contracts are incomplete.

Having a licensed agent involved

is not an essential element of a contract.

A voidable contract

is one in which the contract was missing an essential element: Consideration, offer, acceptance, or legality of object.

The offer to purchase is

is the first document signed in a real estate transaction. Do not forget, however, most states require some sort of agency disclosure prior to the drafting of the offer to purchase. A mortgage would be signed after the buyer's offer has been accepted.

if earnest money is required

it is entirely negotiable

An offer may also be terminated by:

lapse of time, communication or notice of revocation before acceptance, qualified acceptance (counteroffer), or death or insanity of either the offeror or the offeree before acceptance.

The Commercial Lien law permits a broker to

lien a piece of commercial property if she is under contract and has earned her fee, but the owner refuses to pay. This is not true of residential property. The broker would have to file suit in civil court to obtain her fees in a residential dispute.

If the landlord and the area real estate manager of a national retailer both execute a lease and the corporation fails to occupy the premises, what might prevent the landlord from enforcing the terms of the contract?

no signing authority granted. A broker should always make sure, when the principals in a transaction are not personally executing binding documentation, that their representatives have full authority to commit the principal to the terms of the obligation. Neither favorable nor unfavorable general economic conditions are a required element of contracts, nor is the existence of a brokerage listing agreement. The landlord might, however, be able to claim damages from the retailer if the retailer's real estate manager said he had authority to sign and, in doing so, exceeded the scope of his agency.

The basic requirements for an offer include

objective intent. In an offer, the intent requirement is concerned with what a person says or does. The rule is based on what a reasonable person could interpret as a serious expression of intent.

A meeting of the minds refers to the

offer and acceptance. When one party makes an offer and the other party accepts the offer, there is mutual assent, also called a meeting of the minds. The consummation of a real estate sales contract generally does not occur until closing, where a deed and consideration are exchanged.

A contract can be modified

only with the written agreement of both parties.

Options are unilateral

or one-way, contracts. The seller is obligated to sell, but the buyer is not obligated to purchase.

recession

pertains to a mutual agreement between the parties and is not only the seller's decision.

Rejection automatically

terminates an offer. A rejected offer does not have to be formally withdrawn or revoked.

The adequacy or value of the consideration

that one party gives to the other does not have to equal what the other party gives in order to have a binding contract. In this situation undue influence was apparently not an issue, due to the delay prior to signing the contract and the accessibility of third-party advice. John may be taking advantage, but apparently not unfairly.