Section 17 Unit 2 Contract Types and Their Effects
Which term describes a contract that will stand up in court?
Enforceable
Property owner, Jeff, 35, has received a written offer from buyer Kyle, 66, and has given his spoken acceptance. Kyle has signed the agreement. However, before Jeff had a chance to sign the contract, he was in a car accident, and he's now in a coma.
Unenforceable
Which type of contract won't stand up in court?
Unenforceable
The Graysons just closed on their new home. They move in tomorrow. What type of contract do the Graysons have?
Executed
What's the difference between a unilateral contract and a bilateral contract?
In a unilateral contract, one party must act; in a bilateral contract, both parties must act.
Which of the following describes a unilateral contract?
One in which only one party is obligated
So, can implied contracts be legally binding?
Yes
Joseph needed help with his daily activities, so his niece, Brenda, did his cooking, shopping, and cleaning. Joseph told her he would leave some money to her in his will. Brenda thanked him. But when her Uncle Joseph died, he only left Brenda his antique tea set. Why didn't Brenda get any money?
Their contract was verbal.
Burt Samuels brings Breanna Arthur to a home that is For Sale by Owner. The seller lets Burt (the agent) show the house and negotiate a sale on the seller's behalf. What type of contract exists between the agent and the seller?
Implied
School teacher Ramon Ramirez, 64, was looking forward to retirement—and never looking at another eye-rolling teenager for the rest of his life. The year before, while on vacation, he'd stumbled upon a sweet little fishing cottage that had his name all over it—and it was for sale! He knew it was meant to be his post-retirement home. The seller, 75-year-old Wayne Harris, had decided he was bored with the lazy life of a retiree and wanted to move to the Big Apple for a few years. The two signed a lease-purchase agreement. Under the written contract, which was drawn up by an attorney who specialized in such deals, Ramon would lease the property until the following May (a mere eight months away), when he would purchase it. Both parties have signed the agreement. Which type of contract is this?
Executory
Linda wants to purchase her first home. She found the perfect place in Atlanta. The contract for purchase was signed, and she closed on the home within a month. What type of contract is this?
Express
When you arrive at the hair salon for your traditional haircut, it's anticipated that you will pay for the services rendered. What type of contract is this?
Implied
Gangster Mal Mapone needs to dispose of a particularly gabby former business associate, Benny the Bird. He agrees to sign over the title to an old property he owns to Johnny in exchange for Johnny's promise to make Benny disappear. What type of contract is this?
Void You got it! This contract is for an in illegal purpose and is therefore void.
Two drunk people, Earl and Merle, agree to swap houses—Earl's nice house on the Gulf for Merle's run-down shack in the middle of nowhere—if the Cowboys win their next three games. They write up the contract on a piece of paper and each sign it, with the bartender as their witness. They all drink to football, and within two hours, Earl and Merle are dragged off by the cops for being "drunk and disorderly." What type of contract is this?
Void You got it! This contract is void because neither party is sober and therefore not considered competent.
Ken signed a contract to purchase Debra's condo. Ken signed the contract two weeks prior to turning 18, which is the age of majority in his state. Debra found out about his age prior to the closing but honored the contract, and they closed on the condo a month after Ken's birthday. What was the status of the contract when Ken and Debra entered into it?
Voidable
Property owner Mike and buyer Kimberly sign a written real estate contract for Kimberly to purchase Mike's house for $250,000. The contract contains both the legal description of the property and its street address. They both agree on the price and terms of the contract and sign it. In the contract, Kimberly stated that she would provide $10,000 in earnest money by a certain date but failed to do so. What type of contract is this?
Voidable Correct! Because Kimberly failed to meet the terms stated in the contract regarding the delivery of the earnest money, Mike has the option of terminating the contract. Kimberly's actions have made the contract voidable.
Property owner Jacob Sladder, 32, signs a contract with 17-year-old Alfred Woodard in which Jacob agrees to sell his two-bedroom, one-bath home to Alfred for $110,000. Both parties sign the written contract, which Jacob's attorney had drawn up. The contract includes a legal property description, but not the street address. What type of contract is this?
Voidable That's right! This contract is voidable because, as a minor, Alfred doesn't have contractual ability due to his age.
A contract in which the parties trade a promise for a promise is ______.
Bilateral
Artist Lila Morgan signs an exclusive right-to-sell listing agreement with broker Megan Parker, paying the broker a commission when her house sells. Each party has specific obligations under the terms of their agreement. Which type of contract is this?
Bilateral
Banker Olivia Pope agrees to lease her four-bedroom, four-bath country home to author Fitz Grant for $2,000 a month. Both parties have specific obligations under the terms of their written lease. Which type of contract is this?
Bilateral
Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have?
Bilateral
Real estate sales contracts must be valid, express, bilateral, ______, and executed or executory.
Enforceable
Alex, 67, is selling his two-story home to Shelly, 46, for $240,000. The written contract includes the property's legal description, and both parties sign the agreement. Is this contract enforceable or unenforceable?
Enforceable
Jackie, 25, agrees to sell Betty, 54, her one-bedroom, one-bath cottage for $100,000. Both parties are sane and sober, both agree to the terms of the written agreement, and both sign the agreement. Both parties carry out their terms as set forth in the contract, which includes a legal description of the property. Is this contract enforceable or unenforceable?
Enforceable
Marketing director Sherman K "Shep" Watson, 53, had fallen into a sweet deal when he'd been transferred from his small town to the big city seven months earlier. He'd signed a lease-option agreement with traveling salesman, Francis Keane, on Keane's three-bedroom, three-bathroom home on a one-acre ranch just outside the city limits. Shep and Francis negotiated and agreed on the contract, and when the seven-month lease portion of the agreement was up, the two finalized the purchase. The property title went to Shep, the purchase price went to Francis, and everyone lived happily ever after. Which type of contract is this?
Executed
Oscar Schiller and his second cousin, Kraig Kuller, signed a lease-purchase agreement on Schiller's home. At the end of the one-year lease term, Kraig decided to take the option to purchase the property. Once both of the men had fulfilled their obligations under the contract, Kraig received the title to the property, and Oscar received the funds from Kraig's lender. It was a done deal. Which type of contract is this?
Executed
Property owner Easton West, 50, had offered his three-bedroom, three-bath home as a lease-option. Buyer Jim Jarmashian, 34, was sold on the idea, because he wouldn't be financially able to buy it until the following March (10 months from the date they signed the lease-option agreement), when he turned 35, and the trust fund from his grandparents would be available to him. Easton and Jim have signed the written agreement—which was drawn up by a lawyer experienced in dealing with lease-options—and now it's a waiting game. Which type of contract is this?
Executory
Property owner, Stephanie, 75, signs a contract with buyer Lula, 67. The written contract includes the legal description of the property and the terms and conditions of the sale; both parties sign it. Two days before closing, a tornado races through town and flattens the property. Is this contract enforceable or unenforceable?
Unenforceable
Property owner Judy offers to pay a 4% commission to any licensee who brings her a buyer for her two-bedroom, one-bathroom house. Stan, a licensee, can bring her a buyer to earn the commission, but he's under no obligation to do so. Which type of contract is this?
Unilateral
Property owner Romi, 45, signs a six-month option agreement on her ranch with cowboy Tex, 55. Under the terms of an option agreement, Romi agrees to not sell her property to any other sellers for six months. Tex has no obligation to purchase Romi's property from her. Which type of contract is this?
Unilateral
Property owner Marcus, who's 41, agrees to sell his Victorian-style house to 50-year-old buyer Janiece Fraulein. In return, Janiece agrees to pay him $249,000. The written real estate contract includes the legal description of the house and the signatures of both parties to the agreement. What type of contract is this?
Valid
Property owner Skylar, age 25, agrees to sell her one-room cabin to her older cousin, Frank, for $90,000. Their written contract provides the street address, as well as a legal description of the property, and includes the property's furnishings, which consist of one lumpy sofa and one equally lumpy bed. Frank wishes he could have gotten the cabin for less, but his cousin had always been bullheaded. Both parties sign the contract. What type of contract is this?
Valid
A contract is a binding agreement between competent parties to do or not do something in exchange for something of value.
agreement binding competent