Real Estate Course Level 6

Level 6 Game a) Void.

Without legal effect. a) Void. b) Valid. c) Unenforceable. d) Voidable.

Facts of a feather c) lack of legal element.

. A discharge of a contract that has an unlawful intent. . A discharge of a contract that was entered into under duress. a) full performance. b) expiration. c) lack of legal element. d) statute of limitations.

The Essential Elements Game! b) offer & acceptance.

. A meeting of the minds. . The full and unconditional agreement to proposed terms. a) legally competent parties. b) offer & acceptance. c) reality of consent. d) lawful objective.

Level 6 Game b) Unenforceable.

. A valid contract that has passed the statute of limitations. . An oral contract to purchase a real property. a) Void. b) Unenforceable. c) Valid. d) Voidable.

The Essential Elements Game! a) legally competent parties.

. An individual who has reached the age of majority and is of sound mind. . An attorney in fact representing an incapacitated individual in a contract. a) legally competent parties. b) offer & acceptance. c) reality of consent. d) lawful objective.

Facts of a feather c) Express contracts.

. Bonnie and Robert write up an agreement outlining exactly what needs to be done to fulfill a contract. . A contract with explicitly stated and agreed upon terms and conditions. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Facts of a feather a) full performance.

. Considered the most desired discharge of contract. . Occurs once both parties perform their duties. a) full performance. b) expiration. c) lack of legal element. d) statute of limitations.

Facts of a feather b) expiration.

. Even if continuing under the same terms, a new contract needs to be created. . A contract discharged upon the end date of the agreement. a) full performance. b) expiration. c) lack of legal element. d) statute of limitations.

Facts of a feather d) Bilateral contracts.

. Joey and Paul enter an agreement where they both promise to perform. . A two party contract containing an exchange of promises. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

The Essential Elements Game! c) reality of consent.

. Kayla had no reservations about the contract on her new home. . An agreement to enter into a contract as a voluntary act of good faith. a) legally competent parties. b) offer & acceptance. c) reality of consent. d) lawful objective.

Level 6 Game c) Valid.

. Possessing all the essential elements to be legally enforceable. . Binding on all parties. a) Void. b) Unenforceable. c) Valid. d) Voidable.

Level 6 Game d) Voidable.

. Potentially valid contract wherein one or more parties have the right to rescind. . A contract entered into with a minor. a) Void. b) Unenforceable. c) Valid. d) Voidable.

Chapter 6 summary Contract Interpretation

. The "Four Corners" Rule . Hand > Typed > Preprinted

Contract Categories Once a contract has been created, it falls into one of four legal categories:

. Valid . Void . Voidable . Unenforceable

Facts of a feather a) Executed contracts.

. What a sales contract on a house becomes the day after closing. . A contract in which all terms and promises have been fulfilled. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

The Essential Elements Game! d) lawful objective.

. When a contract does not require any illegal activities or outcomes. . A contract that adheres to state and federal laws. a) legally competent parties. b) offer & acceptance. c) reality of consent. d) lawful objective.

Level 6 Game a) Void.

. Without legal effect . Invalid a) Void. b) Unenforceable. c) Valid. d) Voidable.

Facts of a feather b) Executory contracts.

. a contract that has not yet been fully performed . what a sales contract on a house is from the moment it is signed until the day of closing a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Facts of a feather d) statute of limitations.

.The merit of a claim of default has no bearing once this date has passed. . Refers to a deadline after which suits for default cannot be brought. a) full performance. b) expiration. c) lack of legal element. d) statute of limitations.

Chapter 6 summary Contracts can be classified in 6 ways that conveniently organize into 3 pairs:

1) Implied vs. Express. 2) Bilateral vs. Unilateral. 3) Executory vs. Executed.

Chapter 6 summary Once contracts have been accepted they fall under four legal categories:

1) Valid 2) Void 3) Voidable 4) unenforceable

Facts of a feather a) full performance.

Considered the most desired discharge of contract. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Quiz Level 6 d) implied condition

A condition not explicitly stated in the contract but presumed by law to be part of the agreement is known as a(n): a) express condition b) explicit condition c) presumed condition d) implied condition

Bilateral Contracts

A bilateral contract is an agreement in which both parties make a promise to perform the actions specified in the contract. This kind of contract creates reciprocal obligations, which is to say that each party has a responsibility to the other. This is the kind of arrangement that is used most often in the business world and is what people typically think of when discussing contracts. ALL contracts require two parties, but in bilateral contracts BOTH parties make promises. In a bilateral contract, Party A must promise to do something for Party B, and Party B must promise to do something for Party A. This contract obligates both parties to fulfill certain terms. To satisfy or complete a bilateral contract, all parties involved must carry out their promises. Example: Rocky promises to pay Gil an agreed-upon price for his Beverly Hills home, and, in turn, Gil promises to transfer the property title to Rocky. There are specific things they both must do before the contract can be considered executed. If Rocky pays Gil, but Gil does not transfer the title, then the contract will not be considered properly executed, and Rocky can seek legal recourse against Gil for failing to honor the obligations imposed by the contract.

Level Assessment Unilateral In a unilateral contract, the first party makes a promise in exchange for a reciprocal act by the second party. The second party is NOT bound or legally obligated to the agreement, but has the OPTION to accept the terms of the exchange. If they do, the first party is bound.

A broker promised his agents that he would give a bonus to anyone that got four or more listings this month. This is an example of what kind of contract?

Facts of a feather b) Unilateral contracts.

A car dealer offers a $2,000 bonus to whichever salesperson sells the most cars in December. a) Express contracts. b) Unilateral contracts. c) Bilateral contracts. d) Implied contracts.

Facts of a feather a) Implied contracts.

A contract created by the actions of the parties rather than by express agreement. a) Implied contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Facts of a feather c) expiration.

A contract discharged upon the end date of the agreement. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Level Assessment c) voidable A contract entered into under duress or as result of fraud or misrepresentation is voidable by the injured party.

A contract entered into under duress or as result of fraud or misrepresentation is: a) unenforceable b) valid c) voidable d) void

Facts of a feather a) Executed contracts.

A contract in which all terms and promises have been fulfilled. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

contract

A contract is a legally enforceable and binding agreement between parties wherein a promise to do or not do something is given in exchange for valuable consideration. (Forbearance is a term you'll hear for a promise to NOT do something.) There are a few little curiosities in that definition, aren't there? For example, a party can promise not to do something?! Hmmm, what does that look like? And just what is valuable consideration, anyway? example: A professional basketball player named Michael has millions of adoring fans that want to "be like Mike" and mimic his behavior in every way. A shoe company wants to capitalize on that, so they sign Michael to an endorsement contract that stipulates that he will wear their athletic shoes and NOT wear those of a rival company. Getting paid NOT to wear something. Wow, nice gig if you can get it. Am I right, Yoni?

Level Summary Contract

A contract is a promise or a record of a promise between 2 parties or from one party to another party. So remember if we have a contract that is between 2 parties that's what we call a bilateral contract. If we have a promise that is from one party to another that's unilateral. Now a contract serves as a written record of the promises that people have made to each other. And it also serves as a way for those promises to be enforced by the force of law. Whether you realize it or not you're entering into contracts almost every day. Because you don't always have to be signing something to enter into a contract. Now that's the best way to enter into a contract because there is a written record of who promised what when and that's what we call an express contract. The promises are written down, the parties have signed the contract. But there's also something called an implied contact. In an implied contract is where the promise is not expressly stated but it's understood that there is an expectation of one party giving something to another or the two parties giving something to each other. real world example: Think about going to eat at a restaurant. You walk in the door you sit down. You haven't signed anything but it's understood that you are going to order some food, they're going to bring you food to the best of their ability, cooked the best way they can. And you're going to pay them the fair price for the food. Again you haven't signed anything, there is no piece of paper that says you're going to pay the restaurant, but it's understood that when you order food and they bring you food, you're going to pay them. That's an implied contract. Also it is a bilateral implied contract.

The Essential Elements Game! d) lawful objective.

A contract that adheres to state and federal laws. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Facts of a feather b) Executory contracts.

A contract that has Not Yet been fully performed. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Level Assessment c) unenforceable. An unenforceable contract is one that is essentially valid but is without legal remedy.

A contract that is essentially valid but is without legal remedy is said to be: a) void. b) voidable. c) unenforceable. d) null and void.

Facts of a feather c) Express contracts.

A contract with explicitly stated and agreed upon terms and conditions. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Facts of a feather b) lack of legal element.

A discharge of a contract that has an unlawful intent. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Level Assessment c) have reached the age of majority and not be mentally incompetent or intoxicated by drugs or alcohol. A legally competent party to a contract will: 1. have reached the age of majority and 2. not be mentally incompetent or intoxicated by drugs or alcohol.

A legally competent party to a contract will: a) have reached the age of majority and be literate. b) be literate and not be mentally incompetent or intoxicated by drugs or alcohol. c) have reached the age of majority and not be mentally incompetent or intoxicated by drugs or alcohol. d) not be mentally incompetent or intoxicated by drugs or alcohol and have legal representation.

The Five Essential Elements of a Valid Contract

A legally enforceable agreement must create legal rights for all parties involved in the contract and contain the five essential elements of a legally valid contract. They are: 1. Offer and acceptance 2. Consideration 3. Legally competent parties 4. Reality of consent 5. Lawful objective

Level Assessment d) the statute of limitations has expired. A legitimate complaint for a performance failure related to a valid contract will not be considered if the statute of limitations has expired.

A legitimate complaint for a performance failure related to a valid contract will not be considered if: a) the doctrine of performance has expired. b) arbitration hasn't been attempted first. c) the statute of frauds has expired. d) the statute of limitations has expired.

The Essential Elements Game! c) offer & acceptance.

A meeting of the minds. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Breach of Contract

A party to an agreement who does not perform according to the terms and conditions of a contract (without cause) is said to be in breach of contract. This default, as it is sometimes known, has the effect of terminating the defaulting party's rights while maintaining their obligations. When this occurs, the wronged party has a number of remedies available to them. To avoid the expense of a lawsuit, parties to a contract will often agree to efforts in mediation (non-binding) or arbitration (binding). On other occasions, court intervention is sought. Legal Remedies for Breach of Contract: The four primary legal remedies for breach of contract are: 1. Specific performance 2. Rescission 3. Forfeiture 4. Suit for damages A little more detail on each, you ask? Why certainly! 1. Specific Performance: It's a fact of life that sometimes people regret their choices and change their minds. Pull up your social media pics from a few years back, and you'll see what I mean. But once a party has entered a legally binding contract, it's not that easy to get out. In fact, it is possible that the courts could rule for specific performance, which serves to compel the party to fulfill the contract as originally agreed. If you weren't enthusiastic about pursuing the matter through a lawsuit, you could accept partial performance through the application of accord and satisfaction. Specific Performance in Real Estate: The most common circumstance where you'll see the remedy of specific performance applied in real estate is with a purchase agreement where either the seller or the buyer sues to force the other party to go through with the sale when the defaulting party would rather pay damages of some sort. 2. Rescission: Rescission has just the opposite effect of specific performance in that, rather than force completion of the contract, it attempts to put the parties back in a position as though the contract never existed. It is an annulment of the contract. Rescission usually takes place in the early stages of an agreement, and often requires the return of any monies that have already changed hands. 3. Forfeiture: Some contracts contain a forfeiture clause identifying liquidated damages that will serve as compensation to the injured party. Whereas a rescinded contract attempts to put the parties, to the extent possible, in pre-contract condition, forfeiture provides a way to terminate the contract relationship but with compensatory recognition that one party was injured as result of the contract. Forfeiture in Real Estate: In real estate purchase contracts, asset forfeiture is typically confined to the earnest money that was put down by the buyer when they originally entered into the contract. 4. Suit for Damages: The party injured by the breach of contract can initiate a suit for damages. The suit must adhere to the statute of limitations and the courts are typically concerned with restoring the wronged party to the place that they were financially prior to the contract. The type of damages sought will be influenced by the particulars of the breach and what the contract has to say, if anything, about the award of damages in the event of breach of contract. Liquidated Damages: Sometimes a contract stipulates what damages are to be paid in the event of breach of contract. These are known as liquidated damages. Often a contract will have a clause or section dedicated to this topic. Typically, the liquidated damages will comprise the forfeiture of earnest money or other funds held for breach. Parties to a contract will use liquidated damages in situations where valid damages are hard to prove or quantify. Some restraint should be used in pursuing this action, as the courts frown on the use of liquidated damages as a punishment. Compensatory Damages: Compensatory damages, a.k.a. actual damages, refer to the award given to a wronged party as compensation for actual injury or loss. It is further broken down into two categories: special damages and general damages. The former covers such things as economic loss and damage to property, while the latter addresses such things as pain, suffering, and emotional distress. General damages are much more difficult to define and measure than are special damages. Therefore, the courts will look at the specifics of the case and use legal precedent in their rulings if considering general damages. Punitive Damages: Punitive damages are rarely sought or awarded in breach of contract suits, except in cases of fraudulent misrepresentation. Also referred to as exemplary damages, punitive damages are awarded in unusual cases where the defendant's behavior is viewed as intentional and particularly harmful. The purpose of punitive damages is both to punish the offender and to deter others from this behavior in the future.

Chapter 6 summary Breach of Contract

A party who defaults on a contract "without cause" is said to be in breach of contract. The injured party had several options available to them including four legal remedies: . Specific Performance . Rescission . Forfeiture . Suit for Damages

Unilateral contract

A unilateral contract is a contract in which one party (the offeror) makes a promise in exchange for a reciprocal act on the part of the second party (the offeree). So far, it sounds like a regular ol' contract, right? Well, with a unilateral contract, the second party is NOT bound or legally obligated to the agreement, because they made no promise. But the second party retains the OPTION to accept the terms of the exchange, if they so choose. So, in a unilateral contract there are TWO parties but ONE promise. Once the second party (the offeree) accepts and activates their agreement to the terms of the contract, the first party (the offeror) is BOUND and obligated to fulfill their side of the contract. Because one party is obligated from the start while the other party has the option to accept terms of the agreement, this unilateral or one-sided contract is said to lack mutuality. Example: When Seth Bullock, U.S. Marshal, of Deadwood, South Dakota, nailed up a federal "wanted" poster to the community bulletin board outside of the main street post office, he was publicizing a unilateral contract between the U.S. government and all its law-abiding citizens. The $500 bounty for "Quick-Step Quinton," a notorious safe-cracker and bank robber, was the unilateral promise being made. While no citizen assumed any obligation by virtue of reading the poster, any one of them could, at their option, collect the reward if they were to bring "Quick-Step" to the local authorities. The U.S. government, on the other hand, was obligated to the terms of the contract as soon as they publicized the offer.

Level 6 Game c) Unenforceable

A valid contract that has passed the statute of limitations. a) Void. b) Valid. c) Unenforceable. d) Voidable.

Void Contracts

A void contract has no legal effect. From inception, the stipulations and conditions in a void contract can not be legally enforced. It represents an attempt to create a legally binding agreement but does not impose any legal rights or satisfy the requirements of a legally valid contract. In its defective state, a void contract couldn't be completed even if the parties wanted to. Void contracts are typically agreements which: . Are missing one or more essential elements of a valid contract. . Require an illegal or impossible act. . Lack proper consideration. . Contain a material mistake. . Cannot be completed due to an operation of law or act of God. Example: Frankie and Bruno have been doing business together for a long time. Frankie knows that Bruno has two sets of books and that Bruno is hiding income from the IRS. Frankie has just had a very large order cancelled by another customer, which has put him in a tight spot financially. So, Frankie calls Bruno and says, "I'm gonna knock over the bank tomorrow night and need you to drive the getaway car. Don't worry, you'll get 25% of the take. And if you pass on this opportunity? Well, I just might have to let the IRS know about your creative accounting." Bruno agrees to drive the getaway car but is a no-show the night of the heist. This is a void contract. There are a couple of the essential elements of a valid contract missing from inception: reality of consent and lawful objective. Frankie threatened Bruno, who, based upon those threats, rather than a voluntary act of good faith, initially agreed to drive the car. When Bruno subsequently failed to perform, Frankie had no legal recourse available to him that could compel Bruno to live up to their oral agreement. Whether or not Frankie decides to follow through on his threat to Bruno, as unpleasant and real as it might be, is beside the point. From a legal standpoint, no contract between these "friends" ever truly existed. Recap: From inception, a void contract has no legal effect.

Acceptance = Love Me as I Am

Acceptance of an offer is unconditional, meaning every term and condition is agreed to and no effort whatsoever is made to alter the offer in any way. Even if the buyer is completely happy with the terms contained within the current offer, they must also accept the conditions (or lack thereof). If, for example, the buyer agrees to the sales price of a property, the list of fixtures that will stay with the structure, etc., but wants to make the purchase contingent on obtaining financing or selling their own home, that constitutes a change to the current offer and would NOT be considered acceptance. What would it be considered? A good question, Yoni, and you'll get your answer in just a moment. But, first, a couple more points about the acceptance of offers... In Like Manner: On occasion, the offeror will stipulate the form and format in which the acceptance of an offer must be made by the offeree. Lacking that specificity, an offer should be accepted in the same manner as was used by the offeror in making the offer. An oral offer can be accepted orally. A written offer should be accepted in writing. Acceptance of Unilateral Offers: Not that you'll run into this much (if at all) in real estate transactions, but unilateral offers have only one form of acceptance: performance. Since a unilateral contract or offer is binding on only one party — the offeror — the offeree is under no obligation to express acceptance of the terms. If they are interested in the offer, the offeree simply performs according to the offer, and the offeror is bound to deliver on their original promise. Acceptance in Real Estate: Because contracts involving the conveyance of real estate must be in writing to adhere to the statute of frauds, acceptance must be manifested by the signing and delivery of the written offer. (Official notification of offer acceptance is known as delivery.) Constructive vs. Actual Notice/Communication: The buyer can provide oral constructive notice/communication of the acceptance in order to bind the seller to the contract if the written acceptance is put in the mail or is otherwise in the process of being delivered. Once physically received by the seller, actual notice/communication of the written acceptance is considered to have occurred. Electronic Signatures: The issue of constructive vs. actual communication in the acceptance of a real estate purchase agreement rarely comes into play now that federal law has given electronic signatures the same binding equivalency as handwritten signatures. This ruling, in place since 2000, allows for instantaneous communication of written acceptance.

Level Assessment a) Yes. If the contract does not prohibit it, Audrey can transfer her contractual rights and obligations to Leanna by a process known as assignment. If a contract does not prohibit it, a party can transfer their contractual rights and obligations to another individual by a process known as assignment.

After Audrey signed a contract to buy Kayla's house, she changed her mind before closing. But Audrey's friend Leanna wanted the house and was thrilled to have Audrey's contractual rights and obligations transferred to her. Can Audrey do this? a) Yes. If the contract does not prohibit it, Audrey can transfer her contractual rights and obligations to Leanna by a process known as assignment. b) No. Any attempt to get out of the agreement will be considered a breach of contract. c) No. Regardless what the contract says, it is not legal for Audrey to assign her contractual rights and obligations to anyone else. d) Yes. If the contract does not prohibit it, Audrey can transfer her contractual rights and obligations to Leanna by a process known as novation.

Case Study: The Bean & Jerry's Cafe

After being laid off from her job as a bookkeeper, Karen decides to make a stark career change by responding to an ad announcing the sale of a local coffee shop called The Bean & Jerry's Cafe. Karen reviews the details of the listing and decides to make an offer on the cafe that comes in $10,000 under the asking price, and she wants the cafe's customized truck and wall art included in the sale as well.

Age of Majority

Age of majority laws protect minors from entering into agreements that they may not have the experience or knowledge to understand. This means that if anyone under the age of 18 enters into a contract, the contract is considered voidable — at the option of the minor but NOT the other party. All contracts entered into with a minor as one of the parties may become valid when the minor reaches the age of majority if they do not exercise the right to void the contract within a reasonable time of achieving legal age.

Level Assessment Bilateral A bilateral contract is an agreement in which *both* parties make a promise to perform the actions specified in the contract.

Al and Dan have entered into an agreement wherein they both have promises to fulfill. Based on this information, you can know that they have entered into what kind of contract?

Quiz Level 6 b) the sale of a good or service.

All of the following are common examples of unilateral contracts EXCEPT: a) a contest. b) the sale of a good or service. c) the offer of a reward d) a commission

Merger, Mutual Agreement, and Cooling-Off Period

Alrighty, the first three discharges due to acts of the parties are as follows... Merger: Discharge of contract by merger, a.k.a. the merger doctrine, is based on the idea that the original contract can be merged into a new agreement, and that the original agreement disappears (is discharged) in the process. For example, a purchase agreement merges into a deed after closing. Any obligations and duties tied to the purchase agreement that are not reflected in the deed are not enforceable. Mutual Agreement: A contract can be discharged by mutual agreement of the parties, but it needs to be formalized. Why? Because the release from the original agreement is considered to be a new contract itself, and it, therefore, includes the need for consideration and all other essential elements of a valid contract. Fortunately, mutual release of the duties that existed in the original contract qualifies as consideration in the new contract. Cooling-Off Period: The term cooling-off period refers to a window of time within which a party has the right to rescind specific types of contracts for any reason and without liability. According to the Federal Trade Commission (FTC), federal law provides for a three-day cooling-off period for a sale made at your home, workplace or dormitory, or at a seller's temporary location, like a hotel or motel room, convention center, fairground or restaurant. It also applies when you invite a salesperson to make a presentation in your home. The FTC also provides a substantial list of exceptions to and exemptions from this rule, including sales involving real estate. (I hope that opened your eyes a bit!) Different states have created their own laws granting additional cooling-off period rights for different types of contracts, so it's good to know what your state has to say on the matter for the specific type of contract being considered. Cooling-Off in Georgia 🍑: Per the Georgia Department of Law, Consumer Protection Division, the Georgia cooling-off period allows for cancellation of contracts within three business days if: . It involves the sale, lease, or rental of goods or services for personal, family, or household use; and . It is a written agreement between two or more parties, listing all details of the agreement and signed by all parties; and . The commitment totals $25.00 or more, including interest, mailing charges and any other charges related to the agreement; and . It was entered into at a place that is not the regular place of business of the merchant, such as your home, a consumer product party, a seminar sales program, or a hotel room; some exceptions apply.

Voidable Contracts with Adults

An adult who enters into a contract while incapacitated by way of mental illness or the influence of drugs or alcohol has the option of voiding that contract during their illness or incapacitation — and that option even extends for a reasonable time following their recovery from that mental state or incapacitation. As with a minor, once the adult in question has opted to perform, the contract is considered valid if it meets the other essential elements of a valid contract.

The Essential Elements Game! a) legally competent parties.

An attorney in fact representing an incapacitated individual in a contract. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Quiz Level 6 d) all terms have been fulfilled by all parties.

An executed contract is a contract in which: a) all terms have been put in writing. b) all terms are inferred by the actions of the parties. c) only one party is obligated to perform. d) all terms have been fulfilled by all parties.

Executory Contracts

An executory contract, in contrast to an executed contract, is a contract that has not yet been fully performed. To describe a contract as executory, we are simply identifying its stage of existence rather than describing its nature or purpose. Most contracts go through an executory stage with the hope and intention of becoming fully executed. To be considered executory, two elements must exist: 1. A binding contract on multiple parties. 2. One or more of the parties has yet to perform their contractual duties. A Premature Argument: The importance of the distinction between executory and executed contracts can be seen in the ability to bring a case to court. If a contract is not materially complete, the court will be less likely to entertain an argument that the contract is in breach. It would be like reviewing a movie before seeing how it ends. Once one party to the contract performs and requests fulfillment of promises made by the other party, then the question of that party's contract performance can be more easily determined.

Level Assessment d) voidable contracts require a party to disaffirm the agreement to render it unenforceable, whereas void contracts are unenforceable from the start. An important distinction between *void* and *voidable* contracts is that the latter requires a party to disaffirm the contract before it is rendered unenforceable. With the former, the contract is unenforceable from the start.

An important distinction between void and voidable contracts is: a) voidable contracts require a party to ratify the agreement to render it unenforceable, whereas void contracts are unenforceable from the start. b) void contracts require a party to ratify the agreement to render it unenforceable, whereas voidable contracts are unenforceable from the start. c) void contracts require a party to disaffirm the agreement to render it unenforceable, whereas voidable contracts are unenforceable from the start. d) voidable contracts require a party to disaffirm the agreement to render it unenforceable, whereas void contracts are unenforceable from the start.

Level Assessment d) prior to the proper communication of the offer's acceptance. An offer can be withdrawn any time prior to the proper communication of the offer's acceptance — even if a previously stated deadline for acceptance has yet to expire.

An offer can be withdrawn any time: a) prior to or after the proper communication of the offer's acceptance. b) None of the answer choices are correct. c) after the proper communication of the offer's acceptance. d) prior to the proper communication of the offer's acceptance.

Make Those Offers Specific

An offer should be as concrete and specific as possible so that acceptance of the offer results in a valid contract. This goes to the meeting of the minds objective, which demands that both parties hold the exact same view of the terms and conditions of the agreement being entered into. Said another way, the offeree can only agree to an offer to the degree that it is precise and accurate about what is being offered.

Level Assessment Frauds The statute of frauds requires contracts involving the sale or transfer of real estate to be in writing.

An oral contract to buy a piece of real estate is unenforceable because it does not comply with the statute of:

Level 6 Game c) Unenforceable.

An oral contract to purchase a real property. a) Void. b) Valid. c) Unenforceable. d) Voidable.

Unenforceable Contracts

An unenforceable contract is one that has (or had) the potential of being a valid contract, but its enforcement is barred by some attribute of the contract or technicality of law. Another way of describing it is to say that an unenforceable contract is one that is essentially valid but is without legal remedy. Even so, valid but unenforceable contracts can be fulfilled if both parties are willing. They just can't be compelled to do so. Over the next several screens, we'll examine three common restrictions on enforcement of valid contracts: 1) Statute of frauds 2) Statute of limitations 3) Doctrine of laches

Quiz Level 6 d) Unilateral Anne's offer to pay $50 to whomever finds her dog is a unilateral contract wherein she, exclusively, has a duty to perform. Town residents are not required to enter into the contract, but if they find and return Buttons to Anne, she is obligated to perform as outlined in her flyer contract.

Anne posts "Lost Dog: $50 Reward" flyers on telephone poles all over town in hopes that someone will see Buttons, her very naughty and wayward chihuahua. What kind of contract has Anne created? a) Unenforceable b) Void c) Bilateral d) Unilateral

Social Conventions

As mentioned, social conventions play a large role in creating implied contracts. To avoid errors, oversights, and misunderstandings with those not familiar with a specific service, many professionals will take steps to spell out the terms of implied contracts. Taxicab drivers post rates on the windows of their vehicles. Restaurants post prices on their menus. These efforts make it more clear that their services are for sale, and are not a gift.

Discharge of Contracts Recap

Before we move on to our next topic, take a quick peek at this colorful and elegantly designed chart summarizing the different ways contracts can be discharged. Operation of law: . full performance . Expiration . Statute of Limitations . Lack of Legal Element. . Death or Incapacity . Bankruptcy . Alteration of Content Acts of the Parties: . Mutual Agreement . Novation . Accord and Satisfaction . Merger . Cooling-Off Period . Revocation . Renunciation/Abandonment

d) Implied contracts.

Betty assumes Barney is her agent because he spends the day showing her homes for sale. a) Express contracts. b) Unilateral contracts. c) Bilateral contracts. d) Implied contracts.

Bilateral vs. Unilateral Contracts

Bilateral contracts are typically the contracts of choice for the business world. The primary example would be the sale of a good or service. A real estate sales contract is a bilateral contract. Reward offers, contests, and commissions are common types of unilateral contracts that you are likely to encounter. Again, since both contract classes involve two parties, the distinction between the two is found in the number of parties making a promise.

Level 6 Game b) Valid.

Binding on all parties. a) Void. b) Valid. c) Unenforceable. d) Voidable.

Facts of a feather c) Express contracts.

Bonnie and Robert write up an agreement outlining exactly what needs to be done to fulfill a contract. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Level Assessment c) maintaining their obligations. Breach of contract has the effect of terminating the defaulting party's rights while maintaining their obligations.

Breach of contract has the effect of terminating the defaulting party's rights while: a) mitigating their liabilities. b) protecting their interests. c) maintaining their obligations. d) transferring their duties.

Exiting Contracts Through Clauses, Conditions, and Contingencies

Built right into many contracts are clauses, conditions, and contingencies serving as triggering events that allow for cancellation or termination by one or both parties to the contract with or without penalty, depending on the specifics. These are sometimes referred to as "subject to" clauses, underscoring their conditional nature. The forfeiture clause mentioned in our discussion on accord and satisfaction is an example where a previously agreed-upon penalty is incurred in the event of partial performance in order to discharge a contract. A contingency that requires a property to appraise at the sales price is an example of a clause that would allow buyer exit from the purchase contract without penalty. Elements of a Contract Contingency Clause: A properly constructed contingency contract clause will contain the following information: . How to satisfy the contingency . Contingency performance deadlines . Liable parties for associated costs

Level Assessment a) No. Joey is free to accept or reject the counteroffer. When the offeree (Candi) receives the offer she can bind the offeror (Joey) by accepting the offer without change. Otherwise her modification constitutes a rejection of the offer and becomes a counteroffer (and a new offer at the same time). Joey is free to accept or reject this new offer.

Candi reviews Joey's offer to buy her home and makes one change to the terms he is proposing. Can Candi bind Joey to a counteroffer by signing her modified version of Joey's offer? a) No. Joey is free to accept or reject the counteroffer. b) No. A party can only accept or reject an offer; not counter it. c) Yes. Any counteroffer is binding in the negotiation process. d) Yes. The counteroffer is a binding modification of the original offer.

Condition Classifications

Conditions can be classified in terms of how they are created: 1. Express condition 2. Implied condition 3. Constructive condition Let's look at each a little more closely now... Express Condition: An express condition is an explicitly stated condition in the contract that must occur in order to trigger a duty to perform. The matter of timing is not the determinant in classifying it as an express condition but, rather, whether or not the condition is clearly articulated in the contract. A stated stipulation of the buyer's immediate right to occupancy upon closing would be an example of an express condition contained in a typical purchase agreement. Implied Condition: A condition not explicitly stated in the contract but presumed by law to be part of the agreement is known as an implied condition. Example: When Leanna signs a contract for $500,000 a year to play goalie for a women's professional hockey team, an implied condition of that contract would be that the team is expected to provide her with the uniform and equipment necessary to participate in the games. Constructive Condition: A constructive condition is one that is imposed by the courts to further the interests of justice in a contract. Similar to an implied condition, a constructive condition is not explicitly stated in the contract, but, on the other hand, neither is there necessarily an implied agreement to the condition by the parties — which is why the court intervenes. A constructive condition will be imposed by the courts if a literal interpretation of the contract would be unjust. Example: If Heather attempts to pay in Bitcoin for the remodeling work Jaselle did on Heather's Cocoa Beach condo, the court could intervene and impose a constructive condition requiring that payment be made in U.S. dollars, even if the contract did not explicitly call out the currency to be used.

consideration

Consideration carries a unique meaning when it comes to contracts. In order for a contract to be legally enforceable, there must be consideration from each party. Something of Value Consideration is something valuable that each party exchanges in order to demonstrate that they agree to the contract's terms. It can be a promise, money, property, forbearance, or services. In most real estate transactions, consideration is met in the form of a promise for a promise. Without consideration, a contract is not legally binding. The legal philosophy is that a person cannot do something of value without receiving something of value in turn. Valuable consideration is a term used to describe consideration that is deemed sufficient or appropriate for that which is offered in exchange. If the consideration given is not comparable in value to that which is being offered, the agreement could be looked at as a gift rather than a valid contract — or, in some instances, as evidence of bad faith in the negotiation.

Five Essential Elements: Recap

Contract validity requirements: 1. Reality of Consent. 2. Lawful Objective. 3. Legally Competent Parties. 4. Valuable Consideration. 5. Offer and Acceptance.

Quiz Level 6 a) Addenda are for introducing new information while amendments are used for the change of existing information.

Contracts can be modified by the use of addenda and amendments. Which of the following statements is correct regarding their use? a) Addenda are for introducing new information while amendments are used for the change of existing information. b) Amendments are for introducing new information while addenda are used for the change of existing information. c) Addenda can be used for either the addition of new information or the change of existing information. d) Amendments can be used for either the addition of new information or the change of existing information.

Voidable Contracts with Minors 🚸

Contracts entered into by a minor can be valid at the option of the minor. They can force performance on the other party, but that party cannot force performance of the minor. (Remember our case study last chapter about young Josh and old-enough-to-know-better Michael?) Once a minor has opted to perform, the contract converts from voidable to valid. Example: Sam, a 17-year-old high school student, wants to rent an apartment from Nick for one year. Nick draws up a lease for Sam to sign, which requires Sam to place a nonrefundable $250 deposit down on the apartment. The lease also stipulates that if Sam breaks the lease, he is obligated to pay the remaining balance on the lease. According to the lease, $400 in rent is due on the first of every month. Sam signs the lease and moves in the following week. However, two weeks later, Sam realizes that he is not happy living away from home and wants to move back home. Sam sends Nick a letter, stating that he is breaking his lease. Nick, obviously unhappy about Sam's withdrawal from the lease, sends Sam a bill for $4,400, which is the balance remaining on the lease. Nick, however, is not entitled to recover $4,400 because he had a voidable contract with Sam. Remember that in a voidable contract, it's possible that one party remains bound to the contract while the other (victimized) party has the ability to opt out without penalty. So, in this case, as a minor, Sam can hold Nick liable for the contract, but Nick cannot hold Sam to the contract. Sam could have continued to live at the complex and forced Nick to uphold the terms in the contract, but Nick cannot force Sam to remain there or uphold the terms of the lease.

Doctrine of Laches vs. the Statute of Limitations

Don't be fooled into thinking that the doctrine of laches and the statute of limitations are the same thing. Both are concerned with making sure legal claims are made within a reasonable time frame, but the statute of limitations is focused on the statutory time limit for making a claim, while the doctrine of laches relies on the court's discretion as to whether or not a plaintiff has waited too long to make a claim. Example: If a party to a contract wanted to sue for the poor construction quality of a patio, the longer they took to make that claim, the harder it would be to know if the patio's present state were due to faulty construction or simply use, misuse, or reasonable wear-n-tear. A court would have to use judgment on the fairness of a claim at that point.

Facts of a feather c) expiration.

Even if continuing under the same terms, a new contract needs to be created. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Level Assessment d) the doctrine of laches. Under the doctrine of laches, unreasonable delay or negligence in asserting or defending one's rights can create a legal bar to equitable relief if that delay or negligence has importantly affected the status of the person responsible for the violation.

Even if the statute of limitations has not expired, a court may rule that a plaintiff has taken too long to make a claim against the other party. Under what legal concept would the court do this? a) the statute of limitations. lb) the statute of frauds. c) the parol evidence rue. d) the doctrine of laches.

Implied contract

Even though these contracts are established by the parties' actions rather than a written document or an explicit discussion, they can have all of the legally binding power of more explicit contracts and should be taken seriously. Most folks might assume that the majority of contracts entered into are formalized, written documents... the stuff of an attorney's dreams. But in reality, we enter into implied contracts on a daily basis — usually without even thinking twice about it. Here are a few everyday examples of when you might enter an implied contract: . When hailing a cab 🚕 . When ordering (and eating) a meal at a restaurant 🍔 . When sitting in the barber's chair 💈

The Vocabulary of Conditions

Everything about a contract needs to be precise, including the language used with the insertion of conditions in a contract. Words and phrases like when, if, except that, and unless can hold subtle but important legal distinctions upon which expensive court rulings can hinge. Yet another reason you don't want to play lawyer, Yoni. If a contract needs this kind of customization, chances are that your client will need the services of an attorney — which leads nicely into our next topic...

Contract Classifications recap:

Express - a contract with explicitly stated and agreed - upon terms and conditions. Implied - a contract created by the actions of the parties rather than by express agreement. Unilateral - a two-party contract where one party makes a promise. Bilateral - a two-party contract containing an exchange of promises. Executory - a contract that has not yet been fully performed. Executed - a contract in which all terms and promises have been fulfilled.

Express Contracts

Express contracts are oral and written contracts in which the parties explicitly state or express their intentions and their expectations regarding the contract and the exchange of promises. All terms and conditions have been identified and agreed to. They stand in contrast to implied contracts where the existence of a contract (and the nature of its terms) is simply inferred from the parties' conduct. Examples in Real Estate: A listing agreement, a buyer representation agreement, a sales contract, and a lease agreement are all common examples of express contracts that you'll encounter during your career as a real estate agent. This is because the statute of frauds requires written sales contracts involving real property, and most areas require written agency agreements to be in place before the local MLS can be used to market a property. More Easily Remedied: An express contract in written form provides the easiest path of all to remedying a conflict — or even better, preventing one from happening in the first place.

Chapter 6 summary Reasons for Contract Discharge fall under one of two primary classifications:

Falls under: . Operation of Law . Acts of the parties They differ in whether or not the parties intent or desires are taken into consideration.

Case Study: Bertha's Birdhouse or My Little Chickadee (cont.) Answer: Once both parties fulfilled their contractual duties to each other, the contract moves from executory to executed. And, as such, it no longer exists for legal purposes.

Finally, one week before the project completion deadline, Jimmy contacts Bertha and meets with her to review his birdhouse sketches. She's delighted with Jimmy's plans and gives him the green light. (Bertha also finds out that the police finally nabbed the guy who had stolen Jimmy's cell phone two weeks before, which explains why Jimmy had not responded to her messages earlier.) Fast forward to the morning of March 15th, Jimmy installs Bertha's birdhouse, and it looks wonderful! Delighted, Bertha happily pays Jimmy the remaining $50 she owes him and throws in a little somethin' somethin' just because. Once the birdhouse is installed and Bertha pays Jimmy the remainder of what she owes him (plus a little somethin' somethin'), what is the status of the contract? Is it an executory contract or executed contract? Does the contract still exist? Explain your response.

Legally Competent Parties

For a contract to be valid and legally enforceable, the parties involved in the contract must be legally competent. Legal competency implies two things: 1. The individual has reached the age of majority (18 years of age in Georgia) or had their disabilities of minority removed by a court. 2. The individual is not mentally incompetent or intoxicated by drugs or alcohol.

Level Assessment Executory. From the moment a purchase agreement is signed, until closing on the property occurs, the contract is executory.

From the moment a purchase agreement is signed, until closing on the property occurs, the contract is:

Level Assessment Novation Novation is a mutual agreement of the parties to replace an existing contract with a new one. It can also be an agreement to substitute one party for another in a new contract without necessarily changing the other terms and conditions of the original agreement.

Gabby and Daniel agree to replace their existing contract with a new one and to allow Kelsey to take Daniel's place in the new contract as a party to the agreement with Gabby. This is an example of:

Valuable Consideration vs. Good Consideration

Good consideration (goodwill), such as love and affection, can be acceptable in lieu of valuable consideration in a valid contract. When real estate is gifted in exchange for good consideration — usually seen in transactions where property is given to a relative — the term gift deed is used to describe the conveyance.

Death or Incapacity ⚰️

Harkening back, again, to the essential elements of a valid contract, you'll recall that legally competent parties are required to enter into a contract. But what happens if a party becomes incapacitated or dies during the contract? In most cases, death or incapacity does not relieve the party of contractual obligations. An exception to this rule is made for personal services contracts. As pirates (well versed in contract law) like to say, "Dead men tell no tales, paint no houses, build no swimming pools, or perform any other manner of personal service contracts." Personal Service Contracts in Real Estate: In real estate land, agency agreements (listing agreements and buyer representation agreements) are personal services contracts that can be discharged as an operation of law due to death or incapacity of the parties. Remember, however, that an agency agreement contract is between a broker and a client, not the licensee and a client. So, if something happens to you as a sponsored licensee while representing your broker's clients, the broker could simply reassign those clients to other sponsored agents... after a respectful moment of silence for your "misfortune," of course. Bankruptcy 💰: Bankruptcy by either party will often result in the discharge of a contract as an operation of law. With respect to real estate contracts in particular, when a seller files for bankruptcy, their listing agreement is discharged as they typically lose control of the property while the courts decide what will be done with it. Alteration of Contract 📄: Alteration of contract is considered to have occurred whenever a party to the contract attempts to modify the terms or conditions of the original contract in a material way, with or without the other party's consent or knowledge. The consequence of the alteration is the discharge of the old contract since the new terms/conditions no longer represent the original intent of the parties. It is perfectly legal to alter a contract after it's been signed, but the material change must be made by mutual consent of the parties. If one party attempts to alter a contract without consent of the other, the alteration would likely be considered unenforceable. Some contracts contain language stipulating how alterations are to be carried out. If so, adherence to those directions must be followed. And once a contract has been altered, a new contract has been created and the obligations to the old contract have been discharged.

Level Assessment Neither is explicitly stated, but constructive conditions are not implied either, which is why the courts impose them for the sake of justice. Both implied conditions and constructive conditions are not explicitly stated in the contract. But they differ in that constructive conditions are not implied either, which is why the courts intervene and impose the condition for the sake of justice.

How are implied conditions and constructive conditions both alike and different?

Binding = Stuck

If a party willingly enters into a valid contract, they are obligated to its terms and the promises and duties it places upon them. They cannot simply change their mind and abandon the agreement without cause. Attempts to do so are considered a breach of contract and hold a variety of possible consequences.

The Offer: On the Clock

If an offeror makes an offer with an expiration date, it will likely also contain the magical phrase time is of the essence. By crafting the offer this way, the offeror puts the offeree on the clock, informing them of the precise time at which the offer expires. If the offer lacks a specific expiration date, the offeree is allowed a reasonable time to accept the offer. What constitutes reasonable will vary from state to state, as well as the type of agreement being pursued.

Level Assessment c) the award given to a wronged party as compensation for actual injury or loss. Compensatory damages, a.k.a. actual damages, refer to the award given to a wronged party as compensation for actual injury or loss.

If liquidated damages are those specifically stipulated in the contract to be paid in the event of breach of contract, what are compensatory damages? a) damages awarded in unusual cases where the defendant's behavior is viewed as intentional and particularly harmful. b) damages awarded to deter others from this behavior in the future. c) the award given to a wronged party as compensation for actual injury or loss. d) as with liquidated damages, they are damages specifically described in a clause in the contract.

Quiz Level 6 d) The courts will interpret that ambiguity in favor of the party NOT responsible for the construction of the contract.

If the courts see ambiguity in a contract, how will they typically respond? a) The courts will apply "reasonable person" standard and rule accordingly. b) The courts will rule accordingly to the strictest, most literal interpretation of the contract. c) The courts will rule that both parties have an equal responsibility to ensure ambiguity does not exist in the contract. d) The courts will interpret that ambiguity in favor of the party NOT responsible for the construction of the contract.

Rejecting or Ignoring an Offer

If the offeree simply rejects or ignores an offer, it typically signals either the abandonment of the original objective or an unwillingness to budge from previously stated terms. Why do I say this? Because an offeree who wanted to continue in negotiations would not reject or ignore an offer outright but would counter with an offer of their own. (Cue the dance music!) If the offeree were the seller of a property, for example, their rejection or ignoring of an offer could be attributed to the fact that other more favorable offers had already been received and/or accepted or that they weren't willing to move on the listed price. Or, perhaps, the rejection or silence is a signal that the seller was put off by the offer made. When communications stop it can be hard to know exactly what happened, but the intention is pretty clear.

Offer & Acceptance Revisited

In Chapter 1, I identified offer and acceptance as one of the essential elements of valid contracts. I mentioned that this meeting of the minds often took multiple steps to accomplish. The series of steps that leads to a contract usually takes the form of offers and counteroffers between the two parties. And, if a meeting of the minds can't be reached, this back-n-forth negotiation typically ends with an offer revocation or termination. The Players As is often the case in legal land, some funky terminology is used to describe the role of players or parties in the eventual contract. In the initial stages, when an agreement is trying to be reached (through offers and counteroffers), these are the terms you can expect to see or hear: 1. Offeror: The party making the offer 2. Offeree: The party receiving the offer So, it follows, then, that the offeror makes an offer to the offeree. (In real estate transactions, the buyer typically starts off as the offeror, responding to a listing with a purchase offer.)

Quiz Level 6 c) Reciprocal Obligations Reciprocal obligations means that each party has a responsibility to the other. Both parties must fulfill their duties.

In a bilateral contract, what kind of obligations are created? a) Solitary Obligations b) Double Obligations c) Reciprocal Obligations d) Unenforceable Obligations

Consideration = Exchange of Promises

In a real estate contract, the exchange of promises acts as consideration. The buyer promises to pay the purchase price for the property and the seller promises to transfer the deed. Note: Earnest money is NOT consideration because it is evidence of good faith to fulfill a promise, but is not the promise itself. example: Seth provides Cameron with housing. That in and of itself is not a contract. Why? Because Cameron must offer Seth something in return, such as money or a promise to help out with housekeeping or property maintenance in exchange for the housing. Without the exchange of promises, the arrangement is missing an essential element of a valid contract: consideration. Don't worry, Cameron will come through with some consideration. He may be a goofball, but he's not a freeloader!

Supervening Illegality

In an instance where a change in law renders an offer or an existing contract legally impossible to complete, this would result in discharge of the contract.

Case Study: Bertha's Birdhouse or My Little Chickadee answer: The contract between Bertha and Jimmy meets the two elements needed to be considered an executory contract in that 1. it was binding on two parties, and 2. neither party had performed their contractual duties as of this moment.

In anticipation of spring, Bertha contracted with Jimmy, a local handyman, to build an elaborate birdhouse that would be suitable for the chickadees that return to her neighborhood each year. It was February 15th, and she wanted it built, painted, and installed by March 15th. Per their agreement, Bertha advanced Jimmy $25 to cover materials costs, with the promise of an additional $50 upon completion of the project. Jimmy was to get Bertha's approval on his architectural design before moving forward with actual construction of the birdhouse. Does the arrangement between Bertha and Jimmy possess the two elements needed to be considered an executory contract? If so, what would those be?

Contract Conditions

In context of a contract, a condition is any action, deed, or event — excluding the passing of a deadline — that affects a party's duty to perform. It is a qualifier that is placed on a contractual obligation. These are sometimes described as contingencies to the contract and, in real estate purchase contracts, will commonly address such things as: . Home inspections . Appraisals . Ability to get financing

Quiz level 6 c) condition

In context of a contract, what is the term for an action, deed, or event (other than a deadline) that affects a party's duty to perform?In context of a contract, what is the term for an action, deed, or event (other than a deadline) that affects a party's duty to perform? a) binder b) amendment c) condition d) addenda

Executed Contracts

In general, an executed contract is a contract in which all terms have been fulfilled by all parties. While there are many kinds of contracts, all contracts become executed contracts once all parties have completed their contractual obligations. And once all promises of a contract have been fulfilled, the contract is considered executed and ceases to exist. It has no further legal power to bind any of the parties, and is not considered to have any meaningful legal existence. Example: Amy agrees to pay Shelly the negotiated price for a hand-knitted sweater. Once Amy and Shelly have exchanged goods for funds, as long as there are no further stipulations to their agreement, they have an executed contract. And that contract, by virtue of its completion, ceases to exist. You might say that Amy and Shelly made sure to tie up all the loose ends on that sweater agreement. But I wouldn't blame you if you didn't say that.

Court Interpretation of Contracts

In the best-case scenario, a court will not be needed to interpret the contracts you or your clients enter into. However, since it does happen, you need to know how the courts generally approach this responsibility. Here are some guidelines the courts tend to use: . The courts will not repair an invalid contract but, rather, will declare that no contract exists. . The courts will take into consideration only that which appears in the written document. This is known as the four corners rule. . The courts will attempt a practical interpretation, taking into consideration the parties' intent. . The courts will interpret any ambiguity in favor of the party NOT responsible for the construction of the contract. . The courts will give priority to handwritten or typewritten words in a fill-in-the-blanks or preprinted contract.* . And while the courts will not amend or repair an invalid contract, they will impose a constructive condition for justice's sake. *In general, priority of importance of words in a contract looks like this: handwritten > typed > preprinted.

Level Assessment c) unilateral.

In what kind of contract are there TWO parties but ONE promise? a) uni-promise. b) multilateral. c) unilateral. d) bilateral.

Quiz Level 6 b) personal services contracts. In most cases, death or incapacity does not relieve the party of contractual obligations. An exception to this rule is made for personal services contracts.

In what type of contract can a party potentially be exempted due to death or incapacity from their contractual obligations? a) valid contracts. b) personal services contracts. c) bilateral contracts. d) oral contracts.

Mental Competency

Individuals who have been declared mentally incompetent by a judge and individuals temporarily incapable of comprehending contracts (but have not been declared incompetent by a judge) cannot enter into a contract. This includes individuals who might be temporarily mentally incompetent because of alcohol intoxication, drug use, or other reasons. The purpose of mental competency laws is to protect individuals of unsound mind from agreeing to terms they do not fully understand. Therefore, all contracts entered into by an individual declared by a judge to be of unsound mind are void. If the individual was temporarily mentally incompetent when they entered into the contract, it would be voidable at that individual's option once they have returned to a state of sound mind. In order to contract with a person of unsound mind, you would need to contract through someone with power of attorney for the incapacitated individual. A representative with power of attorney is called an attorney-in-fact.

Level 6 Game a) Void.

Invalid. a) Void. b) Valid. c) Unenforceable. d) Voidable.

Level Assessment Yes, because default can be more easily determined after the completion date for the contract has passed. If a contract is not materially complete, the court will be less likely to entertain an argument that the contract is in breach. A party's performance can more easily be determined once the completion date for the contract has passed.

Is it easier to bring a court case for default in executed contracts than it would be in executory contracts?

Corporations as Legally Competent Parties

It might surprise you to know that a corporation can operate as a legally competent party to a contract and take on all the rights, responsibilities, and obligations that a person can.

Level Assessment Executory A contract that remains in the process of being fulfilled is considered to be an executory contract.

Jean and Grace willingly signed a contract a week ago. They have three more weeks to fulfill all the promises and duties they each owe according to the agreement. At this stage, then, their contract is:

Level Assessment Voidable A bilateral contract that is binding on only one of the parties is voidable. Often because one party is a minor or otherwise not considered a legally competent party.

Jerry and Paul have entered into what they agreed would be a bilateral contract. Later, it is discovered that Paul lacked the capacity to enter into a contract when it was executed. Their contract is:

Quiz Level 6 a) Yes, because their contract has all the elements of a valid contract.

Jim and Rita, two adults, enter into a contract promising that Jim will feed Rita's cats three times a week for two weeks, in exchange for $100. They write a contract, both read it, and sign it. Is this a valid contract? Why or why not? a) Yes, because their contract has all the elements of a valid contract. b) No, because they are missing consideration. c) No, because they did not adhere to the statue of frauds. d) Yes, because $100 is a fair price for six cat-sitting visits.

Facts of a feather d) Bilateral contracts.

Joey and Paul enter an agreement where they both promise to perform. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Case Study: Minor Minor Malfunctions Answer: We are told right up front that Josh is a minor. As such, Josh is NOT a "legally competent party," which is one of the essential elements of a valid contract. Additionally, since Michael knew in advance about the bad alternator, it can be argued that he fraudulently misrepresented the condition of the car. "Reality of consent" is an essential element of a valid contract that requires that both parties enter into a contract with accurate information. Josh did NOT have accurate information, therefore, the contract did not meet the standard as a voluntary act of good faith. Even if Michael had been upfront about the car's condition, as a minor, Josh would still have the right to rescind the contract... a right that Michael would NOT have.

Josh, who is a minor, signs a contract agreeing to purchase Michael's car. In the contract, Michael expressly states that the car is in great condition, meaning that the car does not need any major repairs. However, Michael knew all along that the car had a faulty alternator and that if the alternator malfunctions, the car would not be able to start up. When Josh experiences alternator issues and tells Michael he intends to rescind the contract, Michael tells Josh that it is too late since Josh has already completed and signed all the required paperwork. Based on what you've read so far, which elements of a valid contract, if any, do you think are missing? (if none are missing, put "none.") Can Michael hold Josh to the contract.

Case Study: The Bean & Jerry's Cafe (cont.) Answer: Even though Karen agreed to the owner's offer, her desire to include a financing contingency does change the offer. Therefore, she did NOT accept the offer but made a counteroffer. Kern is now the offeror and the cafe owner is the offeree.

Karen agrees to the new terms before the deadline passed but, since the owner did not drop the price, she wants the agreement to be contingent on her ability to get financing for the deal. Does Karen's response constitute acceptance of the owner's offer? Why or why not? Who is now the offeror and offeree at this point in the negotiation?

The Essential Elements Game! b) reality of consent.

Kayla had no reservations about the contract on her new home. a) Offer and acceptance. b) reality of consent. c) lawful objective. d) consideration.

The Essential Elements Game! b) reality of consent.

Kayla had no reservations about the contract on her new home. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Offer Termination

Keeping with the dance metaphor, the music stops when an offer is terminated. This can occur by the actions of either party or as result of an operation of law. And, as with contracts, offers can be terminated in a number of ways — not all of them negative. In fact, the best way for an offer to terminate is through its acceptance, which gives birth to a contract! Here's a list of the ways an offer can terminate, with a brief explanation of each: . Acceptance: By replacing the offer with a contract . Counteroffer: By rejecting the offer and replacing it with a new offer . Rejection: By rejecting the offer without a new offer being made . Expiration: By allowing the passage of a stated expiration date or a reasonable time . Revocation: By withdrawing the offer before acceptance has been communicated . Death or mental incapacity: By the death or mental incapacity of either party before acceptance . Destruction: By the destruction of the subject property of an offer . Improper acceptance: By failing to comply with stipulated manner of acceptance as laid out in the offer About That Revocation... An offer can be withdrawn any time prior to the proper communication of the offer's acceptance — even if a previously stated deadline for acceptance has yet to expire. But once the offeror has been notified of an offer's acceptance, the right to revoke the offer has passed.

Lawful Objective

Lawful objective means that the contract cannot require any illegal activities or outcomes. When a contract contains lawful objective, it takes all necessary laws and statutes into consideration. Any contract that involves illegal conduct is considered void and is unenforceable from inception in a court of law. A legally valid contract adheres to all federal and state laws. Example: For example, a contract created by a seller who wishes to sell property that has been declared hazardous by the EPA due to a leaking underground storage tank would be considered a void contract. The property cannot legally be sold in that condition. A buyer who purchased this property and learned of the condition afterwards could back out of the agreement because the contract was void from the beginning.

Contract Preparation

Laws regarding contract preparation by licensed real estate professionals will vary state by state. Some states have mandatory promulgated contracts and forms that cover almost every use. Other states, like Georgia, do not have promulgated forms but allow for the completion of preprinted forms. When that is the case, the adding of factual information, like names, addresses, dates, etc., is usually allowed. One or More Documents: A contract can be made up of a single document or multiple documents — whatever it takes to provide the essential details of the agreement so that a true meeting of the minds can be had by the parties entering into the contract. (For real estate purchase agreements, that will require the inclusion of a legal description of the property.) Addenda and Amendments: Any modification of a contract should occur by way of an addendum (introduction of new information) or amendment (the change of existing information) to the contract. Once made, new material introduced by addenda is considered part of the original contract. Amendments are considered to be correcting or improving the existing contract document. Parties to the contract must date and sign (or initial) any addenda or amendment created. Example: When the property inspection revealed needed repairs to gutters, the buyer insisted that the seller either make the repairs or reduce the purchase price by the cost of those repairs. Since the gutters and the purchase price were both part of the original contract, no new material is being introduced. An amendment addressing the requested changes to existing terms can be made. Example: Buyer Bonnie realizes that the swing set in the backyard of the home she is purchasing would be ideal for her grandchildren when they come to visit. She decides to get it included in the original purchase price of the home. Her broker sees to it that an addendum to the purchase contract includes the swing set. Because the swing set was never a part of the original contract, an addendum is needed. Fill in the Blanks: When using a preprinted form, a best practice is to never leave a blank empty. If the blank refers to something that is not applicable to the particulars of this agreement, say so with "n/a" or something to that effect. You do NOT want there to be any ambiguity regarding that space. Avoiding the Unauthorized Practice of Law: In addition to what we've discussed thus far, you should also avoid massive alterations or crossing out of sections of a preprinted contract or dispensing advice or legal interpretations of the contract. You can, however give explanations or address questions regarding factual information that is or should be included in the contract. Real Estate Contract Preparation in Georgia 🍑: Georgia License Law 43-40-25.1 It shall be lawful for licensees to complete listing or sales contracts or leases whose form has been prepared by legal counsel and such conduct shall not constitute the unauthorized practice of law. According to current Georgia law, it is considered the practice of unauthorized law for a broker to attempt to create a real estate contract from scratch. A broker may, however, fill in the blanks of a preprinted contract that has been created and/or approved by an attorney. Any preprinted form that requires extensive modification should be referred to an attorney for creation/completion.

Full Performance, Expiration, and Statute of Limitations — Oh, My!

Let's look at the first three discharges due to operation of law on our list. (Order of appearance is NOT a sign of relative importance.) Full Performance: Might as well start out with the most positive way to discharge a contract, right? Full performance typically means both parties did what they were supposed to do and received what they had hoped to receive. And, once all obligations are performed, a contract is considered executed and discharged. Were it always that simple, Yoni. Were it always that simple. Expiration: Many contracts have a set expiration date. Once that date passes, the parties are released from future obligations and the contract discharges as an operation of law. It has expired. It no longer functions or has force. (The expiration of a contract, however, should not be confused with a promise within a contract that has an internal performance deadline.) When faced with the expiration of the original contract, if the parties choose to continue to operate under the same terms and conditions, they should create a separate and new contract for that purpose. Statute of Limitations: In the event a party to a contract defaults in their performance, the wronged party must bring a lawsuit against the defaulting party within the time frame as set forth by the statute of limitations. The right to recovery for damages is lost once that date passes. The merit of a damage claim has no bearing whatsoever in the discharge of contracts due to the statute of limitations.

Quiz Level 6 b) that a meeting of the minds occurs. An offer should be as concrete and specific as possible so that acceptance of the offer results in a valid contract. This goes to the *meeting of the minds* objective, which demands that both parties hold the exact same view of the terms and conditions of the agreement being entered into.

Making an offer as specific as possible helps to ensure what? a) that the contract has a lawful objective. b) that a meeting of the minds occurs. c) that both parties are legally competent. d) unconditional acceptance of the offer.

Level Assessment Most likely Mel Rescission attempts to put the parties back in a position as though the contract never existed. It is an annulment of the contract and usually takes place in the early stages of an agreement, and often requires the return of any monies that have already changed hands.

Mel unexpectedly lost her job the very day after she signed a contract to buy Bradly's house. After Mel explained her situation, Bradly agreed to rescind the contract. In this scenario, who would likely end up with the $10,000 in earnest money that Mel paid when signing the offer?

Acts of the Parties

Not everyone uses the term acts of the parties. Read on and see what you think... Acts vs. Agreement: Some in the real estate biz refer to acts of the parties as agreement of the parties. Those who prefer acts over agreement would say that, while most parties enter a contract in agreeable fashion, they're not always so agreeable in the discharge of contracts. Sometimes, only one party wants to see the contract discharged and the other party complies, even if they're not particularly happy about it. Regardless of the parties' disposition, contracts that are said to be discharged as result of acts of the parties are primary classified as such to differentiate them from contracts that are simply discharged as an operation of law — which often takes place without regard for the parties' actions or desires. Some Effort Required: When contracts discharge due to acts of the parties, it means that at least one party initiated the efforts or actions that led to the discharge. And where there are efforts or actions (plural), a list can't be far behind, right? Right. Here's a list of some of the common reasons for the discharge of contracts due to acts of the parties: . Merger . Mutual agreement . Cooling-off period . Novation . Assignment . Accord and satisfaction . Revocation . Renunciation/Abandonment And, as was the case with our operation-of-law list, I'll now take you, one by one, through the reasons for discharge due to acts of the parties...

Quiz Level 6 b) False Novation is a mutual agreement of the parties to replace an existing contract with a new one.

Novation is used primarily to terminate a contract when there is no intent to enter into a new one. a) True b) False

Parol Evidence Rule: A Legal Sidekick

One of the primary motivations for the statute of frauds is to prevent the fraudulent use of oral contracts. That intent is strengthened with the help of a "legal sidekick" (my term of endearment) known as the parol evidence rule. The parol evidence rule is the legal concept that says that oral evidence can be used to support a written contract but can NOT be used to contradict one — particularly a written contract that is clearly intended to be the final expression of the agreement.

Novation, Assignment, and Accord and Satisfaction

Novation: Novation is a mutual agreement of the parties to replace an existing contract with a new one. It can also be an agreement to substitute one party for another in a new contract without necessarily changing the other terms and conditions of the original agreement. Assignment: In the assignment of existing contracts, an original party to the contract transfers their rights to a new party — after proper notice to the other original party has occurred. Sometimes, contract assignment is allowed; other times a contract will prohibit this with an anti-assignment clause. And certain types of contracts, like personal services agreements, can't be easily assigned. Since the original contract lives on, assignment isn't technically a form of contract discharge, but it is a way for a party to remove themselves from active participation in a contract. The subleasing of an apartment is a common example of assignment in action. Novation vs. Assignment: Novation differs from assignment in that novation allows for the transfer of both rights AND obligations. With assignment, the original party remains liable if the assigned party does not live up to the obligations of the contract. This is because, as stated above, assignment does NOT discharge the original contract, which novation does. Accord and Satisfaction: Accord and satisfaction is an agreement, in accordance with state law, in which the parties agree to discharge the original contract in favor of a new one, wherein accepted performance is often less than what was initially owed. Of the three levels of possible performance — complete, substantial, and partial — the first two generally provide the performing party the right to see the contract discharged through the operation of law, as though their obligation of full performance had been met. Partial performance, however, is the level of performance where material obligations or duties have not been met, and that's where accord and satisfaction can be used to arrive at a mutually agreed upon manner to discharge the contract. Accord and Satisfaction in Real Estate: A common real estate example of accord and satisfaction would be where a seller accepts receipt of the earnest money in lieu of the sale of the property as outlined in a forfeiture clause. Another would be a broker who accepts reimbursement of expenses in exchange for releasing a client from an agency agreement. Novation vs. Accord and Satisfaction: An important distinction between novation and accord and agreement is that the new promise (contract) created through novation releases all duties from the previous contract. With accord and satisfaction, only the performance of the new promise satisfies the previous obligations. In other words, novation says, "We're willing to replace the old contract with a new one," whereas accord and satisfaction says, "We really wanted the original performance required of the old contract but will accept the performance of the new (lesser) promise." Note: In the event of breach of the accord (new promise) in accord and satisfaction, the obligee can sue for performance of the original contract. Novation, on the other hand, bars the resurrection of duties contained in the original agreement.

Null and Void

Null and void is a term you'll encounter in discussions about void contracts. Don't be thrown off by it. It's actually a bit redundant (for emphasis, maybe?) since null and void mean basically the same thing: ineffective; having no legal effect.

Facts of a feather a) full performance.

Occurs once both parties perform their duties. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Offer and Acceptance

Offer and acceptance is another way to describe the meeting of the minds that has to occur for a valid contract to come about. Also known as mutual assent, it's the fully agreed-upon exchange of promises by the parties — even if it took some back-n-forth of offers and counteroffers to get there. example: Desiree has a property listed for sale. After seeing the listing in the paper, Krista contacts Desiree to set up a time to view the property. Krista visits Desiree's property and decides that she wants to purchase it, so Krista makes an offer of $180,000 on the house. The original listing price on the house was $225,000, but since Desiree has not been receiving any offers on the house, she decides to accept Krista's offer of $180,000. By signing the purchase contract, Desiree is showing that she is willing to sell her property to Krista for $180,000. Likewise, Krista's signing of the contract implies that she is willing and able to pay $180,000 for the property. Krista and Desiree have come to a meeting of the minds on the sales contract for Desiree's property.

Level Summary Offer and acceptance

Offer and acceptance is one of the essential elements of a valid contract. It represents the efforts of two parties to come to an agreement known as a meeting of the minds. The negotiations to get an agreement can be quick or lengthy, casual or formal, simple or complex. In every instance you need two parties operating either as an offeror, the person making the offer, or the offeree, the person receiving the offer. Depending on how the negotiations go, the two parties can change hats multiple times before arriving at an agreement.

Offeree Options

Once an offer has been made, the ball's in the offeree's court. They have four possible options regarding the offer: 1. They can accept it. 2. They can counter it. 3. They can ignore it. 4. They can reject it. Ultimately, an offer must be accepted in order for there to be a contract.

Quiz Level 6 b) non-binding and not executory. In order for any contract to be considered executory, it needs to be binding on the parties to the contract and have promises or terms that have not yet been fully performed. Oral agreements to buy real estate (per the statute of frauds) are non-binding, voluntary agreements and NOT, therefore, executory.

Oral agreements to buy real estate are: a) enforceable and binding. b) non-binding and not executory. c) non-binding and executory. d) binding and executory.

Parol Contracts

Parol contracts are orally created contracts or the oral modification of written contracts. Their enforceability depends on circumstances surrounding their creation.

Real Estate Best Practices

Real estate license holders should not let any aspect of the services they render to customers and clients be defined by an implied contract. Implied contracts lead to misunderstandings, and in worse-case scenarios, complaints or litigation.

Facts of a feather d) statue of limitations.

Refers to a deadline after which suits for default cannot be brought. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Level Assessment b) a court will only consider that which is contained within the actual contract document. "Four corners" refers to the legal concept that when a court interprets a contract, it will only consider that which is contained within the "four corners" of the document. It will not look beyond the contract's pages and consider additional terms.

Regarding contract interpretation, what does the phrase "four corners" refer to? a) a court will consider document content and legal precedent equally. b) a court will only consider that which is contained within the actual contract document. c) the ruling on the contract as expressed within the four corners of the courthouse building supersedes any agreements made before or after the hearing. d) a court will interpret a contract against the four corners or pillars of judicial argument.

Operation of Law: The Game

Remember when you used to play Operation as a kid and would get all sweaty and nervous about touching the metal sides of the various bodily cavities with your tweezers? Well, this operation game is nothing like that, so you can relax. You will need to ace this test to keep moving along, however, so do give it your best effort. I have no doubt that you're a smooth operator, Yoni!

Revocation & Renunciation

Revocation: While either party has the power to revoke a contract, it does NOT necessarily mean the party has the right to do so. Revocation is a unilateral act, and, if the revoking party is unable to show cause, they could incur liability for their decision to revoke and may still be obligated to their duties according to that agreement. Renunciation: Renunciation (a.k.a. abandonment) is a similar unilateral action with similar consequences as that of revocation. The primary difference between the two terms comes into play with agency agreements and has to do with which party is taking action to terminate the relationship. . A principal revokes the agent's authority to act on their behalf. . An agent renounces their authority (and willingness) to act on the principal's behalf. Again, in either case, having the power to take this unilateral action does not necessarily give the party the right or relieve them from the duties of the contract. Justifiable cause would have to be shown to avoid the potential of liability or obligation.

Reality of Consent

Some people confuse the term reality of consent with offer and acceptance (also known as meeting of the minds, mutual consent, or mutual assent), but they are different things. Offer and acceptance speaks to the complete and unreserved agreement of terms and conditions, whereas reality of consent focuses on the fact that the agreement was arrived at as a voluntary act of good faith. For there to be a voluntary act of good faith, there cannot be any evidence of fraud, misrepresentation, mutual mistake, or misunderstanding — and certainly no undue influence or duress. The parties, of their own free will, and with all the information needed to make a sound decision, voluntarily enter into the agreement.

The Essential Elements Game! d) consideration.

Something of value exchanged by each party to demonstrate agreement to contract terms. a) Offer and acceptance. b) reality of consent. c) lawful objective. d) consideration.

Statute of Limitations

Statute of limitations has to do with state and federal laws establishing time limits for bringing certain kinds of legal actions. All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred. A legitimate complaint for a performance failure related to a valid contract will not be considered if the statute of limitations has expired. Example: If Jerry decides to sell his apartment to Newman but fails to disclose a problem with the wiring on the seller's disclosure form, and Newman does not discover the issue until after the statute of limitations expired, Newman has no legal recourse against Jerry for what would otherwise be a legitimate cause of action. The same holds true even if Newman discovered the problem before the statute of limitations expired but didn't file suit until after the date had passed. Georgia-Specific Laws 🍑 The Georgia civil statute of limitations varies, depending on the event or subject: . 1 Year - Libel/Slander. . 2 years - Personal injury, fraud, and medical malpractice. . 4 Years - Personal property, trespassing, debt collection, and oral contracts. . 5 Years - Foreign Judgments. . 6 Years - Written contracts. Disclaimer: The purpose behind state and federal statute of limitations laws is to ensure that claims are made in a reasonable time and manner while pertinent evidence is still "fresh" and to prevent the lingering cloud of concern about a possible suit well after the disputed action or event has taken place. Understand that there can be extenuating circumstances that can stop, pause, or speed up the clock with respect to the statute of limitations in a particular situation. Professional legal advice should always be sought in claims involving the statute of limitations.

Level Assessment b) expiration. As of May 1st, Terry's buyer representation contract with Bill will discharge as result of an operation of law known as expiration. To continue operating under the same terms and conditions, they would need to create a new contract.

Terry signed a buyer representation agreement with Broker Bill that runs through the end of April. As of May 1st, that contract will discharge as result of: a) alteration of contract. b) expiration. c) full performance. d) lack of legal element.

The Essential Elements Game! d) consideration.

The $4,000 Joey paid Ben for painting Joey's house a) Offer and acceptance. b) reality of consent. c) lawful objective. d) consideration.

Case Study: The Bean & Jerry's Cafe (cont.)

The cafe owner agrees to Karen's contingency, because he knows Karen had been a bookkeeper and understood what she was getting into. This constitutes acceptance of Karen's offer. Consequently, a sales contract is accepted and signed by both parties. There's really only one thing to say about this story: Cool beans! ☕️

Quiz Level 6 b) the statute of limitations. While the two do differ in an important way, the doctrine of Laches is similar to the statute of limitations.

The doctrine of Laches is most similar to: a) the statute of contracts. b) the statute of limitations. c) the statute of frauds. d) the statute of consent.

Doctrine of Laches

The doctrine of laches is another legal principle that courts use to deny dated claims. Under this doctrine, unreasonable delay or negligence in asserting or defending one's rights can create a legal bar to equitable relief if a delay or negligence has importantly affected the status of the person responsible for the violation. Think of this as the "use it or lose it" rule. If you don't use your right to bring suit, you eventually lose it.

Ongoing Executory Contracts: The Exception to the Rule

The exception to the "let it finish before judging it" approach would be with ongoing or long-term executory contracts. If a party fails to meet their obligations in an ongoing or long-term executory contract, a court would be willing to look at an action brought for this type of failure to perform at any point in the contract timeline. Executory contracts that have an extended, ongoing promise or exchange of promises to be fulfilled with no near end term are not uncommon. Some of these ongoing executory contracts have an end date and others don't. Examples of Ongoing Executory Contracts Without an End Date: . A rental lease where the tenant is obligated to make periodic payments in exchange for living quarters . An equipment lease where the user must pay rent on the equipment for as long as it is being borrowed. Examples of Ongoing Executory Contracts with an End Date: . A rent-to-buy lease where the tenant exercises an option to buy the property . A car lease

Level Assessment c) legally competent parties, offer and acceptance, consideration, lawful objective, and reality of consent.

The five basic elements of a valid contract are: a) legally competent parties, offer and acceptance, consideration, expiration date of agreement, and reality of consent. b) legally competent parties, offer and acceptance, written instrument, lawful objective, and reality of consent. c) legally competent parties, offer and acceptance, consideration, lawful objective, and reality of consent. d) legally competent parties, promise and performance, consideration, lawful objective, and reality of consent.

Level Assessment d) purchase agreements

The following are all common types of unilateral contracts, EXCEPT: a) contests b) commissions c) reward offers d) purchase agreements

Level Assessment c) the contractually stipulated payment of liquidated damages. The forfeiture of earnest money is a common example of the contractually stipulated payment of liquidated damages.

The forfeiture of earnest money is a common example of: a) the contractually stipulated payment of punitive damages. b) the contractually stipulated payment of compensatory damages. c) the contractually stipulated payment of liquidated damages. d) the payment of damages not stipulated by contract.

The Essential Elements Game! c) offer & acceptance.

The full and unconditional agreement to proposed terms. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Facts of a feather d) statue of limitations.

The merit of a claim of default has no bearing once this date has passed. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

Case Study: The Bean & Jerry's Cafe (cont.) Answer: The cafe owner's response is NOT acceptance of Karen's offer but is a counteroffer. The owner is now the offeror and Karen is the offeree. Karen can accept, counter, or reject the new offer but she has to do so within the time period set by the owner.

The owner of the cafe responds by stating that he will include both the truck and the wall art, but at $5,000 above the original asking price. He also states that Karen has by 5:00 p.m. the next day to respond to these new terms. Does the cafe owner's response constitute acceptance of Karen's offer? If not, what would the response be considered? Now who is the offeror and the offeree? What are Karen's options at this point?

Level Assessment d) offer and acceptance. The phrase "meeting of the minds" is associated with "offer and acceptance," which is also known as "mutual assent" because it speaks to the fully agreed-upon exchange of promises by the parties.

The phrase "meeting of the minds" is associated with what essential element of valid contracts? a) lawfully objective. b) legally competent parties. c) consideration. d) offer and acceptance.

Level Assessment b) whether or not the terms of the contract have been completely fulfilled by all parties. The primary defining difference between an executory and an executed contract has to do with whether or not the terms of the contract have been completely fulfilled by all parties.

The primary defining difference between an executory and an executed contract has to do with: a) whether or not the terms of the contract have been explicitly stated. b) whether or not the terms of the contract have been completely fulfilled by all parties. c) the number of parties to the contract. d) the start date of the contracts.

Level Assessment d) the operation of law and the acts of the parties. The reasons for discharge of contracts usually fall under the two primary classifications: the operation of law and the acts of the parties.

The reasons for the discharge of contracts usually fall under what two primary classifications? a) the operation of law and the non-legal actions. b) the acts of the parties and the constructive operation. c) the acts of the parties and the legal precedent. d) the operation of law and the acts of the parties.

Counteroffers

The slightest alteration to an offer, including things like financing contingencies, do not constitute acceptance of the current offer, but they can make for a perfectly appropriate counteroffer. And when a counteroffer is created, two things happen: 1. The parties reverse roles: The offeree becomes the offeror and the offeror becomes the offeree. 2. The original offer becomes null and void. In a very real sense, a counteroffer is combination of a rejection and a new offer, all rolled up into one. And the recipient of the counteroffer becomes the offeree, having all the options of accepting, rejecting, ignoring, or countering the counteroffer. If the recipient of an offer, as mentioned above, changes it in any way, they cannot bind the other party to that change. The Contract Dance 💃: I'm fond of saying that offers and counteroffers make up the "contract dance" that leads to a meeting of the minds. No one else says this, so don't feel compelled to repeat it. But do realize that multiple counteroffers in a single transaction are a very common and accepted practice in the creation of a contract. This is true for contracts in general, not just for real estate. And what it represents is the persistence and good-faith effort of two parties that ultimately want the same thing.

Statute of Frauds

The statute of frauds is a state-level law that requires certain types of contracts to be set out in writing to be enforceable. Those include: . Contracts involving the conveyance of real property (The only real estate exception to this rule would be for lease contracts of less than a year in duration.) . Contracts in excess of one year. . Contracts for personal property of more than $500. The purpose of the statute of frauds is to prevent fraud that can more easily occur with oral contracts. The statute of frauds focuses on enforceability rather than validity. It should be noted that some oral contracts can be enforced, just not those covered by the statute of frauds. Example: If Jerry were to orally agree to the sale of his apartment to Newman, but then had second thoughts, Newman could give Jerry an earful. But what Newman couldn't do is successfully sue Jerry to force him to sell. Why? Because, according to the statute of frauds, all real estate contracts MUST be in writing. Therefore, in this instance, either party can rescind their offer without legal consequence.

Quiz Level 6 b) the statutory deadline.

The statute of limitations is only concerned with: a) amount of damages sought. b) the statutory deadline. c) degree of misrepresentation. d) whether a written contract exists.

Level Assessment c) a window of time within which a party has the right to rescind specific types of contracts for any reason. The term *cooling-off period* refers to a window of time within which a party has the right to rescind specific types of contracts for any reason and without liability.

The term "cooling-off period" refers to: a) a window of time within which a party has the right to with draw an offer for any reason. b) a window of time within which a party has the right to consider counteroffers. c) a window of time within which a party has the right to rescind specific types of contracts for any reason. d) a window of time within which a party has the right to accelerate specific types of contracts for any reason.

validity

The validity and enforceability of a contract depends on its meeting all the essential, basic requirements of the law. (That would be the five essential elements of a valid contract that we discussed in Chapter 1!) Valid contracts accurately reflect the contracting parties' intentions, making them legally binding and legally enforceable for all parties involved. Example: Kelly, a 32-year-old accountant, approaches Kassy and says, "I would like to buy your house. I am willing to offer you $100,000 for it." Kassy replies, "I accept your offer of $100,000. You must sign this earnest money contract and place the earnest money into escrow. This contract contains the terms of our agreement; please read it over carefully and sign it if everything meets your satisfaction." After reading through the contract, Kelly signs her name. ✍️ In this example, Kelly and Kassy have entered into a valid contract because it contains all the essential elements of a valid contract: it has an offer and acceptance, consideration, legally competent parties, reality of consent, and it serves a lawful objective.

Case Study: Thelma Wants Out! (1)Answer: At this point in time, we know of no legal or administrative reason that the contract would need to be discharged. Instead, it appears that Thelma has simply reconsidered her decision to enter into the contract. Therefore, her attempt to discharge the contract would be properly categorized as "acts of the parties." (2) Answer: This discharge of contract does not require the entering into a new agreement with new obligation (as with novation) or contain an acceptance of a lesser performance than the original obligations in exchange for discharging the contract(as with accord and satisfaction). Instead, it is simply a mutual agreement to discharge the contract with consideration simply being the relief of obligations.

Thelma and Louise were best of friends, and they acted on a belief that many friends do: that good friends = good business partners. (Sometimes true; oftentimes not.) They signed a contract to start a business together selling themselves as tour guides along a series of scenic cliff overlooks. But before they even put out the money to buy a company Ford Thunderbird (a refurbished 1966 convertible), Thelma started getting cold brake feet and informed Louise that she wanted out of the contract. (1) Based on what you now know, would Thelma's desire to discharge the contract be as result of an operation of law or acts of the parties? Although surprised and disappointed, Louise agreed, and they took action to discharge the contract they had signed just days earlier. Louise also accepted with grace Thelma's declining an invitation to consider some other joint business venture, like co-ownership of a pet shop. Oh well, those Thunderbird convertibles were gas guzzlers, anyway. (2) With this additional information, is this "acts of the parties" best classified as mutual agreement, novation, or accord and satisfaction? why? Because she was such a good friend, Louise made it clear that Thelma's inclination to keep business and friendship separate would not damage their relationship. In fact, the last thing anyone heard from them was something about a road trip.

Is It Four or Five Essential Elements?

Those who believe that reality of consent can be assumed to be a part of offer and acceptance would say, then, that there are only four essential elements to a valid contract. Your buddy, Ace, likes to make sure his students understand the importance of the reality of consent, so I keep it separate and listed as a fifth essential element.

Quiz Level 6 a) identify its stage of existence.

To describe a contract as "executory" is to: a) identify its stage of existence. b) describe its nature or purpose. c) define its performance- based. d) indicate it can be terminated.

Case Study: Bertha's Birdhouse or My Little Chickadee (cont.) Answer: The courts would likely not entertain Bertha's claim at that particular moment since there was still time in this executory contract for Jimmy to perform as promised - even if Bertha had a right to be somewhat nervous about it.

Two weeks pass without a word from Jimmy. Not only that, he isn't responding to any phone calls or text messages that Bertha leaves for him. She goes from being a little impatient to stressed to outright angry. Now, Bertha's thinking about taking legal action against Jimmy for breach of contract. Regardless of whether or not you feel Bertha's overreacting, how would the courts likely react if Bertha tried to pursue a breach of contract claim at this point in time? Please justify your answer.

Level Assessment b) death or incapacity relieves a party from contractual obligations in personal services contracts. In most cases, death or incapacity does not relieve a party of contractual obligations. An exception to this rule is made for personal services contracts, which is what Jimmy's contract with Jerry was.

Two years into his contract to coach Jerry's semi-pro football team, Jimmy choked on a cream cheese bagel and died. Jimmy's estate is not obligated to perform according to the terms and conditions of Jimmy and Jerry's contract. Why? a) death or incapacity relieves a party from contractual obligations only if the surviving party agrees. b) death or incapacity relieves a party from contractual obligations in personal services contracts. c) death or incapacity relieves a party from contractual obligations regardless of the type of contract. d) death or incapacity relieves a party from contractual obligations in all bilateral contracts.

Level Assessment With most contracts other than personal services contracts In most cases, death or incapacity does not relieve a party of contractual obligations. The estate of the deceased often assumes the obligation. An exception to this rule is made for personal services contracts.

Under what circumstances does death NOT cause the discharge of a contract?

Contract Legal Status: Buckle up, Buttercup!

Valid - contract possessing the essential elements to be legally enforceable. Unenforceable - potentially valid contract lacking legal force. Void - invalid contract lacking legal effect from inception. Voidable - potentially valid contract wherein one or more parties have the right to rescind.

Contract Classifications

Valid contracts can be classified in one or more of the following ways: . Express contracts . Implied contracts . Unilateral contracts . Bilateral contracts . Executory contracts . Executed contracts

Level Assessment Executory and voidable This contract would be executory because it has not yet been performed. And, as Al was incapacitated at the time of entering into the agreement, the contract is also voidable.

Vern and Al entered into a contract for the sale of a condominium. At the time of signing, Al was intoxicated and unable to make proper decisions. Closing is supposed to occur in three weeks. This contract is:

Voidable Contracts

Voidable contracts are potentially valid contracts where at least one party has the option to rescind or terminate the contract without penalty. Oftentimes, voidable contracts involve a party who is incapable of legally entering into a contract, such as a minor or an adult incapacitated by mental illness or the influence of medication or alcohol. Additionally, contracts entered into under duress or as result of fraud or misrepresentation are also voidable (by the victimized party).

Quiz level 6 b) False

Voidable contracts can never be valid contracts. a) True b) False

Facts of a feather a) Executed contracts.

What a sales contract on a house becomes the day after closing. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Facts of a feather b) Executory contracts.

What a sales contract on a house is from the moment it is signed until the day of closing. a) Executed contracts. b) Executory contracts. c) Express contracts. d) Bilateral contracts.

Level Assessment Accept it, counter it, ignore it, reject it The four options an offeree has in regard to an offer that has been received include to accept it, counter it, ignore it, or reject it.

What are the four options an offeree has in regard to an offer that has been received?

Level Assessment d) consideration. "Consideration" is the word used to describe something valuable that each party exchanges in order to demonstrate that they agree to the contract's terms.

What is the word used to describe something valuable that each party exchanges in order to demonstrate that they agree to the contract's terms? a) escrow. b) accord. c) consent. d) consideration.

Level Assessment c) They serve as triggering events that allow for cancellation or termination of the contract with or without penalty, depending on the circumstances. Contingency clauses serve as triggering events that allow for cancellation or termination by one or both parties to the contract with or without penalty, depending on the specifics. These are sometimes referred to as "subject to" clauses, underscoring their conditional nature.

What do contingency clauses do? a) They serve as triggering events that allow for cancellation or termination of the contract, but always with penalties attached. b) They serve as triggering events that require cancellation or termination of the contract with or without penalty, depending on the circumstances. c) They serve as triggering events that allow for cancellation or termination of the contract with or without penalty, depending on the circumstances. d) They serve as triggering events that allow for cancellation or termination of the contract, but never with penalties attached.

Level Assessment Counteroffer to the offer. The slightest alteration to an offer, including things like financing contingencies, do not constitute acceptance of the current offer, but are, instead, a counteroffer — which is a new offer.

What do you call the response to an offer that agrees to the offer if some modifications can be made?

Quiz Level 6 d) The original contract is merged into a new agreement and the original agreement (and its terms) disappears. With the discharge of a contract by merger, the original contract is merged into a new agreement, and the original agreement (and its terms) disappears in the process.

What happens when a contract is discharged by merger? a) The original contract can be merged into a new agreement, and the original agreement (with all its terms) survives. b) The original contract is merged into the new agreement only if the new agreement is wider in scope than the original. c) The original contract and the new agreement constitute two distinct but equal contracts that survive. d) The original contract is merged into a new agreement and the original agreement (and its terms) disappears.

Quiz Level 6 b) the original offer becomes null and void and the counteroffer becomes the new offer. When a counteroffer is made, the parties reverse roles: The offeree becomes the offeror and the offeror becomes the offeree. Also, the original offer becomes null and void and the counteroffer becomes the new offer.

What happens when a counteroffer is made? a) the original offer remains active until the counteroffer is accepted. b) the original offer becomes null and void and the counteroffer becomes the new offer. c) the counteroffer must be accepted. d) no further counteroffers can be made.

Level Assessment An individual given power of attorney to act on behalf of another individual. An attorney-in-fact is an individual given power of attorney to act on behalf of another individual. An attorney-in-fact will often serve as the legally competent party while appointed to act in the interests of someone who otherwise would not be capable of entering into a contract.

What is an attorney-in-fact?

Quiz Level 6 a) that the contracts being discussed are both executory and valid (or thought to be).

What is fair to assume when talking about the discharge of contracts? a) that the contracts being discussed are both executory and valid (or thought to be). b) that the contracts being discussed could be valid or invalid. c) that the contracts being discussed are both executed and invalid (or thought to be). d) that the contracts being discussed are both executed and valid (or thought to be).

Level Assessment 18 The age of majority in Georgia is 18 years.

What is the age of majority in Georgia?

Level Assessment c) reality of consent.

What is the essential element of a valid contract that occurs when an agreement has been arrived at as a voluntary act of good faith? a) offer and acceptance. b) lawful objective. c) reality of consent. d) consideration.

Level Assessment Performance. Performance is the only form of acceptance of unilateral offers because they are binding only on the offeror. The offeree is under no obligation to express acceptance of the terms. If the offeree simply performs according to the offer, the offeror is bound to deliver on their original promise.

What is the only form of acceptance of a unilateral offer?

Quiz Level 6 c) Discharge due to acts of the parties requires an action of at least one of the parties to the agreement; discharge due to operation of law does not. Contracts that are said to be discharged as result of acts of the parties are primary classified as such to differentiate them from contracts that are simply discharged as an operation of law — which often takes place without regard for the parties' actions or desires.

What is the primary point of differentiation between contracts that discharge due to acts of the parties as opposed to those that discharge due to an operation of law? a) Discharge due to acts of the parties carries less liability for the parties involved than does discharge due to operation of law. b) Discharge due to operation of law requires an action of at least one of the parties to the agreement; discharge due to acts of the parties does not. c) Discharge due to acts of the parties requires an action of at least one of the parties to the agreement; discharge due to operation of law does not. d) There is no significant point of differentiation between discharge due to acts of the parties and discharge due to operation of law.

Level Assessment Forbearance "Forbearance" is the term used to describe a contractual promise to NOT do something.

What is the term used to describe a contractual promise to NOT do something?

Level Assessment c) operation of law. The term used to describe the discharge of contracts as result of the application of law without regard for the parties' agreement or cooperation is "operation of law."

What is the term used to describe the discharge of contracts as result of the application of law without regard for the parties' agreement or cooperation? a) constructive law. b) acts of the parties. c) operation of law. d) operation of the parties.

Level Assessment b) acts of the parties. "Acts of the parties" is the term used to describe the discharge of contracts due to the effort or action of at least one of the parties to the contract.

What is the term used to describe the discharge of contracts due to the effort or action of at least one of the parties to the contract? a) force of law. b) acts of the parties. c) discharge of the parties. d) operation of law.

The Essential Elements Game! d) lawful objective.

When a contract does not require any illegal activities or outcomes. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Level Assessment c) the statute of limitations. In the event a party to a contract defaults in their performance, the wronged party must bring a lawsuit against the defaulting party within the time frame as set forth by the statute of limitations. The right to recovery for damages is lost once that date passes.

What law bars a wronged party from the award of compensation for damages resulting from default by the other party to a written and signed, valid contract? a) the cooling-off period. b) the statute of frauds. c) the statute of limitations. d) the statute of standard contracts.

Quiz Level 6 a) time is of the essence. If an offeror makes an offer with an expiration date, it will likely also contain the phrase "time is of the essence."

What phrase, commonly used in conjunction with an offer, indicates that the offer comes with an expiration date? a) time is of the essence. b) response is essential. c) this is the essence of the offer. d) it is time to respond.

Level Assessment a) a binding contract on multiple parties and one or more of those parties has yet to perform their contractual duties. In order for a contract to be considered executory, two elements must exist: (1) a binding contract on multiple parties and (2) one or more of those parties has yet to perform their contractual duties.

What two elements must exist in order for a contract to be considered executory? a) a binding contract on multiple parties and one or more of those parties has yet to perform their contractual duties. b) a binding contract on multiple parties and both parties have fully performed their contractual duties. c) a non-binding contract on multiple parties and one or more of those parties has yet to perform their contractual duties. d) a contract that is binding on only one party and that party has yet to perform their contractual duties.

Level Assessment d) void contract. A void contract is an attempt to create a legally binding agreement; however, it does not impose any legal rights or satisfy the requirements of a legally valid contract.

What type of contract has no legal effect? a) unilateral contract. b) bilateral contract. c) voidable contract. d) void contract.

Level Assessment c) liquidated damages. Liquidated damages are those which have been specifically stipulated by the contract to be awarded in the event of breach of contract.

What type of damages are those which have been specifically stipulated by the contract to be awarded in the event of breach of contract? a) punitive damages. b) general damages. c) liquidated damages. d) compensatory damages.

Level Assessment c) implied. Implied contracts are always established by the parties' actions rather than a written document or an explicit discussion?

What types of contracts are always established by the parties' actions rather than a written document or an explicit discussion? a) unilateral. b) express. c) implied. d) executory.

Level Assessment b) accord and satisfaction. Accord and satisfaction is an agreement, in accordance with state law, in which the parties agree to discharge the original contract in favor of a new one, wherein accepted performance is often less than what was initially owed.

When Geni told Matt, her broker, that she wanted to take her house off the market even though there were four months to go in their listing agreement, Matt kindly agreed to let her out of the contract in exchange for reimbursement of his expenses. This is an example of: a) novation. b) accord and satisfaction. c) revocation. d) assignment.

Lack of Legal Element

When I speak of lack of legal element, I am saying that something regarding the contract lacks legal standing or purpose or is unlawful in some way. Once the legal defect is discovered, the contract may be discharged as an operation of law for lack of legal element. Those Elements Are Essential: You may recall back to the first chapter of this level, we listed the essential elements of a valid contract as follows: . Offer and acceptance . Consideration . Legally competent parties . Reality of consent . Lawful objective If any of these are missing from inception of the contract, that would be considered a lack of legal element. For example, if it could be proven, after the fact, that one of the parties to the contract had entered into the agreement as a minor or under duress, the contract could be discharged as an operation of law for lack of legal element. Other contracts start out perfectly valid but something happens along the way to make them legally lacking in some regard. When that happens, they, too, can be discharged as an operation of law for lack of legal element. For example, if one party contracted another to build a structure on an agricultural property and it was later found to be the habitat of a federally protected species, the objective of the contract would then be considered as having an illegal purpose and be discharged. You Mean I've Got a Choice? ‍♂️: If you're wondering why, in some instances, I've used language to indicate that a contract could be discharged rather than must be discharged, that's because it depends on the circumstance. With contracts deemed to have an illegal purpose — like engaging in construction where expressly prohibited by environmental law — the parties can NOT choose to continue with the contract. But if the legal element that is lacking has to do with one of the parties entering into the agreement — as with a minor entering into a contract or an adult agreeing to a contract under duress — that type of lack of legal element simply makes the contract voidable by that party, which means they can choose whether or not to have the contract discharged as an operation of law.

Level Assessment Void Since the contract Jane signed to buy Melba's Mercedes convertible listed the wrong VIN, this contract is void as there can be no reality of consent with a contract containing a material mistake.

When Jane signed the contract to buy Melba's Mercedes convertible, neither party realized the contract listed the wrong vehicle identification number (VIN). This contract is:

Contract to Closing = Executory

When a buyer and seller sign a contract for the purchase of a property, they have entered the executory phase of the contract. They will stay there until the completion of closing, at which point, the contract becomes fully executed. Oral Real Estate Agreement ≠ Executory 🗣: It's worth noting that an oral real estate agreement can eventually become an executed contract, but it is NOT considered an executory contract. In order for any contract to be considered executory, it needs to be binding on the parties to the contract. (Remember the two requirements for an executory contract?) And, per the statute of frauds, real estate sales contracts must be in writing to be enforceable, so oral real estate agreements are considered voluntary, non-binding understandings — and NOT enforceable contracts. Execution Confusion ‍♀️: I should mention that you might, on occasion, hear someone say, "I executed a contract today!" When used this way, the individual is simply saying that they signed a contract today. It does not necessarily mean that the contract has been fulfilled, only that a contract has been created.

Level Assessment c) ratified the contract. When a party performs their obligation to a contract that they could have rescinded, they are said to have ratified that contract.

When a party performs their obligation to a contract that they could have rescinded, they are said to have done what? a) disaffirmed the contract. b) reset the contract. c) ratified the contract. d) constituted the contract.

Ratified and Disaffirmed Contracts

When a party performs their obligation to a contract that they could have rescinded, they are said to have ratified that contract. This can happen with voidable contracts entered into by underaged or temporarily incapacitated individuals who might choose to perform their obligation to the contract. This brings up an important distinction between void and voidable contracts. The latter requires a party to disaffirm the contract before it is rendered unenforceable. With the former, the contract is unenforceable from the start.

Level Assessment a) merger. Discharge of contract by merger, a.k.a. "the merger doctrine," is based on the idea that the original contract can be merged into a new agreement, and that the original agreement disappears (is discharged) in the process. For example, a purchase agreement merges into a deed after closing.

When a purchase contract for real estate converts into a deed, this is an example of contract discharge by way of: a) merger. b) revocation. c) novation. d) assignment.

Level Assessment Implied When an individual hails a cab and tells the driver where they want to be taken, that passenger has entered into an implied contract. Although there is no formally expressed contract or written agreement, the passenger is legally bound to pay the fare.

When an individual hails a cab and tells the driver where they want to be taken, that passenger has entered into what kind of contract?

Level Assessment Time is of the essence. When an offeror wants the offeree to understand that the offer has a precise time limit, the phrase "time is of the essence" will often appear in the offer. Absent this phrase, the offeree is allowed a reasonable time to accept the offer.

When an offeror wants the offeree to understand that the offer has a precise time limit, what is the phrase that will often appear in the offer?

Operation of Law

When contracts are said to be discharged by operation of law, it means that they are discharged as result of the application of law without regard to the desires, intent, or agreement of the parties — as opposed to acts of the parties, which DO reflect the intent of at least one of the parties to the contract. Is It Operation of Law or Force of Law?: The operation of law is sometimes referred to as the force of law, particularly when the discharge of contract goes against the desire of one or more of the parties. While many view the terms as interchangeable, the term force of law is often used to underscore the legally compelling nature of the cause for the discharge of contracts, whereas the operation of law can be for a discharge that is purely administrative in nature. Hey, Look — It's a List!: Here's a list of some of the common reasons for the discharge of contracts due to the operation of law: . Full performance . Expiration . Statute of limitations . Lack of legal element . Death or incapacity . Bankruptcy . Alteration of the contract Would it surprise you if I said we will now look at each of these in a little more detail? I didn't think so.

Quiz Level 6 a) Get it in writing.

When it comes to contracts, a best practice is to: a) Get it in writing. b) Keep it simple. c) Use industry templates. d) Establish deadlines for performance.

Quiz Level 6 a) when to underscore the legally compelling nature of the cause for the discharge.

When might the discharge-of-contract term "force of law" be used in place of the term "operation of law"? a) when to underscore the legally compelling nature of the cause for the discharge. b) when a concern for legal accuracy of the term is demanded. c) when used in certain regions of the country that are more litigious. d) when used to underscore the purely administrative nature of the cause for the discharge.

Level Assessment c) lack of legal element. When something regarding the contract lacks legal standing or purpose or is unlawful in some way, it is said to suffer from lack of legal element. Once the legal defect is discovered, the contract may be discharged as an operation of law.

When something regarding the contract lacks legal standing or purpose or is unlawful in some way, it is said to suffer from: a) ambiguous language. b) equitable resolution. c) lack of legal element. d) ill intent.

Discharge of Contracts

When we talk about the discharge (termination) of contracts, there are a couple of assumptions you can make: 1. We're talking about an executory contract. That makes sense, right? You can't terminate a contract that hasn't been created or that has already been executed. It has to be "live"... that is to say, in that range of time between creation and execution. 2. The contract is valid — or at least it's thought to be valid until some discovery or event says otherwise. Two Primary Classifications: If you read up on this topic long enough, you will quickly find a sizable number of smart and experienced people with very different approaches to grouping or organizing how the discharge of contracts can be looked at. My logic board tells me that you should worry less about how to group them and focus more on understanding the different ways to discharge contracts and the legal implications of each. I'm going to approach it as though they all fit under one of these two classifications: . Operation of law . Acts of the parties And we'll begin by looking at the ways contracts might be discharged due to the operation of law...

Level Assessment Doctrine of laches. The statute of limitations is focused on the statutory deadline for making a claim, while the doctrine of laches relies on the court's discretion as to whether or not a plaintiff has waited too long to make a claim.

Whereas the statute of limitations is concerned with the statutory deadline for making a claim, what relies on the court's discretion as to whether or not a plaintiff has waited too long to make a claim?

Level Assessment d) offer and acceptance

Which essential element of a valid contract can be described as the fully agreed-upon exchange of promises by the parties? a) Lawful objective b) consideration c) legally competent parties d) offer and acceptance

Quiz Level 6 b) The person making the offer is the offerer, and the person receiving the offer is the offeree.

Which is true about the parties making and receiving offers? a) The persons making and receiving the offer are offerors. b) The person making the offer is the offerer, and the person receiving the offer is the offeree. c) The persons making and receiving the offer are offerees. d) The person making the offer is the offeree, and the person receiving the offer is the offeror.

Quiz Level 6 c) a contract that adheres to both state and federal laws.

Which of the following describes a contract possessing the essential element of lawful objective? a) a contract that focuses on adherence to state laws rather than federal laws. b) a contract that focuses on adherence to federal laws rather than state laws. c) a contract that adheres to both state and federal laws. d) a contract that adheres to the wishes of the parties without concern to state or federal laws.

Level Assessment a) an adult of sound mind who entered into an agreement voluntarily. An adult of sound mind who entered into an agreement voluntarily would not usually be considered party to a voidable contract. Minors, incapacitated adults, or adults who entered into an agreement under duress are all individuals who would be party to a voidable contract.

Which of the following individuals is least likely to be a party to a voidable contract? a) an adult of sound mind who entered into an agreement voluntarily. b) an incapacitated adult who entered into an agreement voluntarily. c) a minor who entered into an agreement voluntarily. d) an adult who entered into an agreement under duress.

Quiz Level 6 a) Acceptable

Which of the following is NOT a category that contracts can fall under? a) Acceptable b) Voidable c) Valid d) Unenforceable

Quiz Level 6 c) Jeremy sits down for a shoe shine on the town square over lunch.

Which of the following is NOT an example of an express contract? a) Mr. Shelton Calls Peter on the phone and offers him $25 to haul away the debris from his yard. b) Julie obtains a loan from her bank to finance her home improvement plans. c) Jeremy sits down for a shoe shine on the town square over lunch. d) Derrick signs a three-year modeling contract offered him by a Hollywood talent agency.

Level Assessment b) It was constructed by a licensed attorney-at-law.

Which of the following is NOT necessarily required for a contract to be considered as possessing lawful objective? a) It takes all necessary state laws and statutes into consideration. b) It was constructed by a licensed attorney-at-law. c) It cannot require any illegal activities or outcomes. d) It takes all necessary federal laws and statutes into consideration.

Quiz Level 6 b) documented legal precedent for the contingency.

Which of the following is NOT one of the elements contained in a properly constructed contingency contract? a) how to satisfy the contingency. b) documented legal precedent for the contingency. c) contingency performance deadlines. d) liable parties for associated costs.

Level Assessment c) the doctrine of contracts. Three common restrictions on the enforcement of valid contracts include the statute of frauds, the statute of limitations, and the doctrine of Laches.

Which of the following is NOT one of the three common restrictions on the enforcement of valid contracts? a) the statute of frauds. b) the statute of limitations. c) the doctrine of contracts. d) the doctrine of laches.

Quiz Level 6 a) The defaulting party retains their rights and obligations in the contract. A party to an agreement that does not perform according to the terms and conditions of a contract without cause is said to be in breach of contract.

Which of the following is NOT true about breach of contracts? a) The defaulting party retains their rights and obligations in the contract. b) A party fails to perform their duties of the contract without cause. c) There are multiple remedies available to the wronged party. d) it is also known as "default."

Level Assessment a) Only written contracts can be express contracts. Express contracts may be written or oral. The parties explicitly state their expectations as well as the terms and conditions of the contract. If one party fails to perform according to the agreed-upon terms of an express contract, the injured party can more easily seek damages and legal recourse.

Which of the following is NOT true about express contracts? a) Only written contracts can be express contracts. b) An injured party can more easily seek damages and legal recourse with express contracts. c) The parties explicitly state their expectations as well as the terms and conditions of the contract. d) Express contracts may be either written or oral.

Quiz Level 6 c) an offer can be revoked after the acceptance of the offer but before the signing of the contract. An offer can be withdrawn any time prior to the proper communication of the offer's acceptance — even if a previously stated deadline for acceptance has yet to expire. Once the offeror has been notified of an offer's acceptance, the right to revoke the offer has passed.

Which of the following is NOT true about offer revocation? a) an offer can be withdrawn any time prior to the proper communication of the offer's acceptance. b) Once the offeror has been notified of an offer's acceptance, the right to revoke the offer has passed. c) an offer can be revoked after the acceptance of the offer but before the signing of the contract. d) an offer can be revoked prior to a stated deadline for acceptance of the offer.

Quiz Level 6 c) It has to do with a statutory time limit of enforcement of agreement terms.

Which of the following is NOT true of the statute of frauds? a) It concerns the conveyance of real property. b) It is a state-level law. c) It has to do with a statutory time limit of enforcement of agreement terms. d) It says that certain contracts must be in writing to be enforceable.

Level Assessment b) The primary distinction between the two is how many parties are involved in the contract. Bilateral contracts are typically the contracts of choice for the business world. Reward offers, contests, and commissions are common types of unilateral contracts. Both contract classifications involve two parties; the distinction between the two is found in the number of parties making a promise.

Which of the following is NOT true regarding bilateral and unilateral contracts? a) Reward offers, contests, and commissions are common types of unilateral contracts. b) The primary distinction between the two is how many parties are involved in the contract. c) Both contract classifications involve two parties; the distinction between the two is found in the number of parties making a promise. d) Bilateral contracts are typically the contracts of choice for the business world.

Level Assessment They will repair an invalid contract if possible. The courts will not repair an invalid contract; will apply the "four corners rule;" will interpret any ambiguity in favor of the party NOT responsible for the construction of the contract; and will give priority to handwritten or typewritten words in a fill-in-the-blanks or preprinted contract.

Which of the following is NOT true regarding contract interpretation by the courts?

Quiz Level 6 a) All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred.

Which of the following is TRUE about the statute of limitations? a) All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred. b) Statute of limitations are federal-level laws only. c) A legitimate complaint for a performance failure related to a valid contract will be considered even if the statute of limitations has expired. d) Statute of limitations are state-level laws only.

Level Assessment b) The parties reverse roles.

Which of the following is TRUE when a counteroffer is made? a) The parties maintain their roles. b) The parties reverse roles. c) The counteroffer is not considered a new offer. d) the original offer becomes a valid backup offer.

Quiz Level 6 d) A rent-to-buy lease where the tenant can exercise an option to buy the property at the conclusion of the lease period.

Which of the following is an example of an executory contract with a set end date? a) A cable TV package subscription where the customer pays a monthly fee for access to programming. b) An automatically renewing apartment lease contract where the tenant pays rent in exchange for living quarters. c) An equipment lease where the user pays rent on the equipment being borrowed. d) A rent-to-buy lease where the tenant can exercise an option to buy the property at the conclusion of the lease period.

Quiz Level 6 c) Bob buying Sue's motorcycle "as-is" because she doesn't really know its true condition. While the true condition of the motorcycle is unknown, there is no attempt to mislead or pressure anyone and no evidence that incorrect information has been given.

Which of the following is an example of reality of consent? a) Tommy pressuring Candi into leasing his apartment because "something" might happen to her cat if she doesn't. b) Tina and Tony purchasing a car by signing a contract that lists the wrong VIN number for the vehicle. c) Bob buying Sue's motorcycle "as-is" because she doesn't really know its true condition. d) Ralph selling a forged 1904 World's Fair stamp as though it were an original.

Quiz Level 6 c) agreements that involve adults entering into contracts of their own free will.

Which of the following is most likely NOT a void contract? a) agreements that can not be completed due to an operation of law or act of God. b) agreements that require or involve an illegal act, fraud, misrepresentation, duress, or undue influence. c) agreements that involve adults entering into contracts of their own free will. d) agreements that are missing one or more essential elements of a valid contract.

Quiz Level 6 b) valuable consideration is exchanged for a promise to either do or NOT do something.

Which of the following is true about contracts? a) consideration must be exchanged for that which is exactly equal in value. b) valuable consideration is exchanged for a promise to either do or NOT do something. c) Consideration is not necessary for a contract. d) valuable consideration is never exchanged for a promise to NOT do something.

Quiz Level 6 b) in an agency relationship, a principle revokes and an agent renounces. In an agency relationship, a principal can revoke the agent's authority to act on their behalf whereas an agent can renounce their authority (and willingness) to act on behalf of the principal. They both have the power to take these actions, but not necessarily the right.

Which of the following is true about revocation and renunciation in an agency relationship? a) in an agency relationship, a principle renounces and an agent revokes. b) in an agency relationship, a principle revokes and an agent renounces. c) in an agency relationship, an agent can renounce in every instance without liability. d) in an agency relationship, a principle can revoke in every instance without liability.

Quiz Level 6 b) Contracts found to be lacking a legal element do not always result in discharge.

Which of the following is true regarding the discharge of contracts found to be lacking a legal element? a) Contracts found to be lacking a legal element always result in discharge. b) Contracts found to be lacking a legal element do not always result in discharge. c) Contracts found to be lacking a legal element are considered as having been created for an unlawful purpose. d) Contracts found to be lacking a legal element have always been that way from inception.

Level Assessment d) a contract is a legally binding agreement between parties wherein a promise to do or not do something is given in exchange for valuable consideration. A contract is a legally enforceable and binding agreement between parties wherein a promise to do or not do something is given in exchange for valuable consideration.

Which of the following provides the BEST definition of a contract? a) a contract is a legally binding agreement between parties wherein a promise to not do something is given in exchange for valuable consideration. b) a contract is a potentially binding agreement between parties wherein a promise to do something is given in exchange for valuable consideration. c) a contract is a binding agreement between parties to do something, for which valuable consideration could be given. d) a contract is a legally binding agreement between parties wherein a promise to do or not do something is given in exchange for valuable consideration.

Level Assessment b) the legal concept that says that oral evidence can be used to support a written contract but can NOT be used to contradict one. The parol evidence rule is the legal concept that says that oral evidence can be used to support a written contract but can NOT be used to contradict one — particularly a written contract that is clearly intended to be the final expression of the agreement.

Which of the following provides the BEST definition of the parol evidence rule? a) a rule giving equal weight to oral evidence in cases involving written contracts. b) the legal concept that says that oral evidence can be used to support a written contract but can NOT be used to contradict one. c) an umbrella term encompassing all rules surrounding the use of oral evidence in court. d) a legal bar to the use of oral evidence in all cases involving written contracts.

Quiz Level 6 c) Beto agrees to the terms and conditions of the buyer's counteroffer. Acceptance of an offer is unconditional, meaning every term and condition is agreed to and no effort whatsoever is made to alter the offer in any way.

Which of the following scenarios constitutes acceptance of an offer? a) Sue offers to buy the property for $10,000 less than the asking price. b) Jon agrees to the seller's terms and offers to buy the property contingent on his being able to get financing. c) Beto agrees to the terms and conditions of the buyer's counteroffer. d) Ralph agrees to the buyer' request to include the refrigerator, washer, and dryer if the buyers will increase their offer by $1,000.

Level Assessment c) a six-month lease for a beachfront condo. The statute of frauds requires certain types of contracts to be in writing to be enforceable, including those involving the sale or lease (in excess of one year) of real property; contracts in excess of one year, and the sale of personal property valued above $500.

Which of the following scenarios would NOT be subject to the statute of frauds? a) the sale of a single-family home. b) an 18-month agency agreement. c) a six-month lease for a beachfront condo. d) the sale of a $17,000 motorcycle.

Level Assessment They can be completed if the parties choose to. Void contracts are typically contracts that: are missing one or more essential elements of a valid contract; require or involve an illegal act, fraud, misrepresentation, duress, or undue influence; or cannot be completed due to an operation of law or act of God.

Which of the following statements is NEVER true about void contracts?

Level Assessment b) renunciation. When contracts discharge due to acts of the parties (as opposed to discharge due to the operation of law), it means that at least one party initiated the efforts or actions that led to the discharge, which would be true in the case of renunciation.

Which of the following would be considered a discharge of contract due to the acts of the parties? a) expiration. b) renunciation. c) death or incapacity. d) lack of legal element.

Quiz Level 6 c) an adult not incapacitated in any manner. An adult not incapacitated in any manner would be considered a legally competent party to a contract.

Which of the following would be considered a legally competent party to a contract? a) a minor under the influence of drugs. b) an intoxicated adult. c) an adult not incapacitated in any manner. d) a minor incapacitated in any manner.

Level Assessment If an offer says "time is of the essence," then the offeree is allowed a "reasonable" time to accept the offer. If an offer lacks a specific expiration date, the offeree is allowed a "reasonable" time to accept the offer. What constitutes "reasonable" will vary from state to state, as well as the type of agreement being pursued.

With respect to offers made, which of the following is NOT true about the concept of "reasonable time"?

Level Assessment a) revocation. Mutual agreement, novation, and accord and satisfaction are three acts of the parties that are mutually agreed-upon actions and, therefore, bilateral acts. Revocation, on the other hand, is a unilateral act that a single party has the power to do (but maybe not the right to do).

Which of these "acts of the parties" discharges is considered a unilateral act? a) revocation. b) accord and satisfaction. c) mutual agreement. d) novation.

Quiz level 6 a) It can completed if both parties are compelled. An unenforceable contract is one that has (or had) the potential of being a valid contract, but its enforcement is barred by some attribute of the contract or technicality of law. Valid but unenforceable contracts can be fulfilled if both parties are willing. They just can't be compelled to do so.

Which of these is NEVER true about an unenforceable contract? a) It can completed if both parties are compelled. b) It can be fulfilled if both parties are willing. c) Its enforcement is barred by some attribute of the contract or technicality of law. d) It has (or had) the potential of being a valid contract.

Level Assessment Revocation Revocation is NOT a type of discharge due to the operation of law, rather it is a type of discharge due to the acts of the parties.

Which of these is NOT a type of discharge due to the operation of law?

Level Assessment Specific performance A legal remedy for breach of contract that requires the defaulting party to perform in accordance with the terms of the contract (as opposed to paying damages to the other party) is specific performance.

Which of these is a breach of contract legal remedy that requires the defaulting party to perform in accordance with the terms of the contract?

Level Assessment c) executed contract. A contract that has been fully performed (both sides have completed their obligations) is an executed contract.

Which of these is a contract that has been fully performed (both sides have completed their obligations)? a) voidable contract. b) void contract. c) executed contract. d) executory contract.

Quiz Level 6 b) $100,000. Consideration is something valuable that each party exchanges in order to demonstrate that they agree to the contract's terms. Money is the most common form of consideration in real estate transactions.

Which of these is a possible example of a buyer's consideration? a) getting the contract in writing. b) $100,000. c) having legally competent parties. d) the title to real property.

Level Assessment d) the statute of limitations depends on the court's discretion to determine whether or not a plaintiff has taken too long to make a claim. The statute of limitations has to do with state and federal laws establishing time limits for bringing certain kinds of legal actions. All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred.

Which of these statements is NOT true about the statute of limitations? a) a legitimate complaint for a performance failure related to a valid contract will not be considered if the statute of limitations has expired. b) there are state and federal laws establishing the statute of limitations. c) established time limits rather than the court's discretion will be looked at to determine whether or not a claim can be made. d) the statute of limitations depends on the court's discretion to determine whether or not a plaintiff has taken too long to make a claim.

Level Assessment d) a principal. A contract involving an agent and a principal can be discharged by either party (with or without consequences). When the principal terminates the representation relationship, it is called revocation. When the agent terminates, it is known as renunciation.

Who can revoke the agency agreement? a) neither a principal nor an agent. b) a principal or an agent. c) an agent. d) a principal.

Level Assessment a) because the new terms/conditions no longer represent the original intent of the parties. The consequence of alteration of contract is the discharge of the old contract since the new terms/conditions no longer represent the original intent of the parties. Once a contract has been altered, a new contract has been created and the obligations to the old contract have been discharged.

Why does alteration of contract result in discharge of the contract? a) because the new terms/conditions no longer represent the original intent of the parties. b) because alterations of contracts are always illegal. c) because alterations of contracts are unilateral actions. d) because alterations are used exclusively to discharge a contract.

Level Assessment a) because it is considered to be a new contract in and of itself. Contract discharge by mutual agreement requires consideration and the other essential elements of a valid contract because it is considered to be a new contract in and of itself.

Why does contract discharge by mutual agreement require consideration along with the other essential elements of a valid contract? a) because it is considered to be a new contract in and of itself. b) because it is considered to be an addendum to the original contract. c) because it is considered to be contingency within the original contract. d) because it is considered to be an amendment to the original contract.

Level Assessment a) because the seller typically loses control of the property while the courts decide what will be done with it. When a seller files for bankruptcy, their listing agreement is discharged as they typically lose control of the property while the courts decide what will be done with it.

Why does seller bankruptcy typically result in the discharge of a purchase contract? a) because the seller typically loses control of the property while the courts decide what will be done with it. b) because the buyer usually does not want to buy a property stigmatized by the bankruptcy status of the prior owner. c) because the seller is usually no longer interested in selling the property. d) because the listing broker can no longer be assured of a commission from the sale of the property.

Six Classifications = Three Pair

You might notice that the six classifications I have given you naturally cluster into three pairs that can be compared and contrasted for better understanding: 1. Express vs. implied 2. Unilateral vs. bilateral 3. Executory vs. executed

Level 6 Game d) Voidable

a contract entered into with a minor. a) Void b) Valid c) Unenforceable d) Voidable

Chapter 6 summary What makes a contract valid?

a contract must contain 5 essential elements. 1) Offer and acceptance. 2) Consideration. 3) Legally competent parties. 4) Reality of consent. 5) Lawful Objective.

Facts of a feather b) lack of legal element.

a discharge of a contract that was entered into under duress. a) full performance. b) lack of legal element. c) expiration. d) statue of limitations.

The Essential Elements Game! b) reality of consent.

an agreement to enter into a contract as a voluntary act of good faith. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

The Essential Elements Game! a) legally competent parties.

an individual who has reached the age of majority and is of sound mind. a) legally competent parties. b) reality of consent. c) offer & acceptance. d) lawful objective.

Quiz Level 6 All of the following are essential elements of a legally valid contract EXCEPT: a) consideration b) lawful objective c) notarization d) reality of consent

c) notarization

Quiz Level 6 Also known as mutual assent, offer and acceptance is: a) a counteroffer that adds all provisions deemed necessary by the offeree. b) an agreement in principle of the major terms of a contract. c) the fully agreed-upon exchange of promises by the parties. d) not required for the creation of a valid contract.

c) the fully agreed-upon exchange of promises by the parties.

Level 6 Game b) Valid.

possessing all the essential elements to be legally enforceable. a) Void. b) Valid. c) Unenforceable. d) Voidable.

Level 6 Game d) Voidable

potentially valid contract wherein one or more parties have the right to rescind. a) Void b) Valid c) Unenforceable d) Voidable