Section 8 Unit 2: Elements of a Valid Contract

What is a legally competent party?

A party who has the legal and mental capacity to enter into a contract

What does legal purpose mean?

Contracts must be written for a lawful objective.

What is duress?

includes the use or threat of force, such as blackmail or bodily harm

What's consideration with regard to a contract?

the giving of something of value in exchange for something of value

Five elements are required for a valid contract

- Legally competent parties - Offer and acceptance - Consent - Legal purpose - Consideration

Which of these statements describes the essential element of offer and acceptance? There are two correct answers. 1. Two parties enter into an agreement with full understanding of contract terms. 2. Jim makes an offer on a property with specific terms. Angel accepts it without reading through the terms. 3. A real estate broker offers to represent a client in a sales transaction. They discuss the terms of the agreement and the client accepts. 4. A buyer makes an offer to a seller, and the seller makes a counter offer.

1 & 3 (Great work! Offer and acceptance, also known as mutual agreement or acceptance, occurs when parties enter into the agreement with full understanding of the contract terms. By signing the contract, the parties are indicating they understand and agree to the terms.)

What are 3 types of consideration?

1. Money (or promises of funds in the future) 2. Property (real estate or other personal property) 3. Labor, love, or good wishes or physical actions (non-monetary)

Review each statement about legally competent parties and determine if the statement is true or false. 1. If a party doesn't have legal capacity and enters into a contract anyway, the contract is voidable by the party lacking the capacity. 2. A minor who enters into a contract to purchase real estate has contractual ability. 3. The minor who enters into a contract with an adult to purchase real estate may hold the adult to the contract, but the adult can't legally hold the minor to the contract.

1. T 2. F 3. T

In a real estate transaction, which three of the following are examples of consideration? A) The seller's promise to sell the property to the buyer B) The seller's commitment to transfer the property to the new owner C) The buyer's decision to try and take out a loan D) The property itself

A, B, D

What is fraud?

It occurs when misrepresentation of a material fact is intentional

True or false: earnest money is required to have a valid contract

False. It is not.

What is undue influence?

It exists when an act of persuasion overcomes another individual's free will and judgement

A contract for an illegal purpose is ______.

Void