Unit 4: Contracts-- The Basic

an agreement in which each person promises to perform an act in exchange for another person's promise to perform. A bilateral contract is an agreement in which each person promises to perform an act in exchange for another person's promise to perform.

A bilateral contract is:

Unilateral Contract Hint: A unilateral contract is a contract in which a party promises to perform without expectation of performance by the other party.

A contract in which a party promises to perform without expectation of performance by the other party is called a(n):

executed contract. Hint: In an executed contract, all parties have performed completely.

A contract in which all the parties have performed completely is called a(n):

executory contract

A contract in which obligation to perform exists on one or both sides.

Express Contract Hint: A contract may be an express contract, in which the parties declare the terms and put their intentions in words, either oral or written.

A contract in which the parties declare the terms and put their intentions in words, either oral or written is known as a(n):

voidable Duress is unlawful and makes the contract voidable. A voidable contract is valid and enforceable on its face, but may be rejected by the person who signed it under duress, menace, or undue influence.

A contract signed under duress is:

specific performance

A court action brought to compel a party to carry out the terms of a contract

is legally incapable. A listing agreement is an employment contract, so all four elements to create a valid contract must be present to be valid. A minor cannot enter into a valid and binding contract because of incapacity. If capacity is lacking, the contract is void from the start.

A minor cannot hire a real estate broker using a listing agreement because a minor:

someone under 18 years of age. Hint: Parties entering into a contract must have legal capacity to do so. Almost anyone is capable, with a few exceptions. A person must be at least 18 years of age unless married, in the military, or declared emancipated by the court. A minor is not capable of appointing an agent, or entering into an agency agreement with a broker to buy or sell.

A minor is:

attaching the breaching party's bank account. Hint: A breach of contract is a failure to perform on part or all of the terms and conditions of a contract. A person harmed by non-performance can accept the failure to perform or has a choice of three remedies: (1) unilateral rescission, (2) lawsuit for money damages, or (3) lawsuit for specific performance.

A person who has been harmed by another person's breach of contract has all of the following remedies, except:

offer

A presentation or proposal for acceptance to form a contract.

buyer is notified of the seller's acceptance. Hint: In a valid contract, all parties must mutually agree. Mutual consent (or mutual assent), is sometimes called a meeting of the minds. It is an offer by one party and acceptance by the other party.

A valid contract between buyer and seller exists when the:

parol evidence rule. Under the parol evidence rule, when two parties make oral promises to each other, and then write and sign a contract promising something different, the written contract will be considered the valid one

A written contract takes precedence over oral agreements. This principle is expressed by the:

6 year old child Hint: Parties entering into a contract must have legal capacity to do so. Almost anyone is capable, with a few exceptions. A person must be at least 18 years of age unless married, in the military, or declared emancipated by the court.

A(n) _____ could not enter into a contract.

addendum

Additional documents attached to and made part of a contract.

Payment of money Choice (a) is correct because consideration is required—not necessarily as money. The following items are essential for a valid contract: capacity, mutual consent, lawful object, and consideration. Choices (b), (c), and (d) are required.

All of the following are necessary for a valid contract except:

Sufficient Writing A valid contract does not require a sufficient writing. However, according to the statute of frauds, sufficient writing is required for an enforceable real estate contract. The question is asking the valid requirements for a contract not a valid real estate contract

All of the following are necessary for a valid contract, except:

Tender

An offer by one of the parties to carry out his or her part of the contract.

duress. Hint: Use of force, known as duress or menace, which is the threat of violence, cannot be used to get agreement.

When force is used to get agreement in accepting a contract, it is called:

Lateral Rescission Hint: A person harmed by non-performance can accept the failure to perform or has a choice of three remedies: unilateral rescission, lawsuit for money damages, or lawsuit for specific performance.

Which of the following is not a remedy for breach of contract?

Written agreement Hint: Most real estate contracts must be in writing. However, in order for a contract to be legally binding and enforceable, there are four requirements: (1) legally competent parties, (2) mutual consent between the parties, (3) lawful objective, and (4) sufficient consideration.

Which of the following is not one of the four requirements needed for a contract to be legally binding and enforceable?

Handwritten clauses and insertions Hint: Handwritten clauses and insertions take precedence over any typewritten content, attached addenda, and preprinted material. Typed clauses and insertions take precedence over any attached addenda and the preprinted material. Attached addenda take precedence over the preprinted material.

Which of the following takes precedence in a contract?

revocation

The canceling of an offer to contract by the person making the original of fer.

Written Instrument According to the Statute of Frauds, the employment agreement must be in writing to be enforceable

The essential element needed to create a binding employment contract for the sale of any right, title, or interest in real property is a(n):

performance Performance is not essential to create a valid contract. Choices (a), (b), and (c) are required to create a valid contract.

The following are necessary elements to create a valid contract, except:

forbearance. Hint: Forbearance, or forgiving a debt or obligation, or giving up an interest or a right, qualifies as valuable consideration.

The forgiveness of a debt or obligation, or giving up an interest or a right, qualifies as valuable consideration. It is called:

statute of frauds

The law that requires contracts to be in writing.

offeror

The party making an offer.

offeree

The party receiving an offer.

Statute of Limitations

The period of time limited by statute within which certain court actions must be brought by one party against another.

assignor

The person transferring a claim, benefit or right in property to another.

abrogation

The person transferring a claim, benefit, or right in property to another.

counteroffer

The rejection of an original offer that becomes a new offer.

Waiver A waiver is the relinquishment or refusal to accept a right. A tender of performance is an offer by one of the parties to carry out his or her part of the contract. Novation is the substitution, by agreement, of a new obligation for an existing one, with the intent to extinguish the original contract. Forbearance is forgiving a debt or obligation, or giving up an interest or a right.

The relinquishment or refusal to accept a right is known as:

Waiver

The relinquishment or refusal to accept a right.

novation

The substitution by agreement of a new obligation for an existing one.

Novation Novation substitutes one contract for another, by mutual agreement. The intent is to extinguish the former contract and create a new one.

The substitution of an obligation or contract with a new one is called:

Tom - handwritten clauses and insertions take precedence over any type-written content, attached addenda, and preprinted material. Handwritten clauses and insertions take precedence over any typewritten content, attached addenda, and preprinted material. Typed clauses and insertions take precedence over any attached addenda and the preprinted material. Attached addenda take precedence over the preprinted material.

Tom listed his home with broker Barbara. The listing agreement was a standard preprinted form into which Barbara typed the listing information. She typed 90 days as the term of the listing. However, at the listing meeting, Tom changed the term of the listing agreement from 90 to 60 days which he wrote in the contract, initialed the change, and signed the contract. After 60 days, Tom told Barbara he was going to list with another broker, but Barbara told him that he had 30 days remaining on his existing listing agreement. Who is correct, broker Barbara or seller Tom?

Ways to discharge a contract Hint: Discharge of contract refers to the cancellation or termination of a contract. Contracts are discharged by performance, release, assignment, novation, and breach

What is the commonality of full performance, release, assignment, novation, and breach?

They are methods of discharging contracts. Contracts are discharged by performance, release, assignment, novation, and breach

What is the commonality of unilateral rescission, performance, and breach?

4 Years Hint: The time limit under the statute of limitations to bring an action on most real estate contracts is 4 years.

What is the time limit under the statute of limitations to bring an action on most real estate contracts?

Bilateral A bilateral contract is an agreement in which each person promises to perform an act in exchange for another person's promise to perform.

When a promise is given by both parties with the expectation of performance by the other party, it is known as a(n) (blank) contract.

forbearance

(1) Refraining from action by a creditor against a debt or after the debt has become due. (2) Forgiving a debt or obligation

4 Years The statute of limitations is 4 years for actions on any written contract, which includes most real estate contracts.

How long is the statute of limitations for a contract to purchase a condominium?

statute of frauds Hint: In California, the statute of frauds requires that certain contracts be in writing to prevent fraud in the sale of land or an interest in land.

In California, the __________ requires that certain contracts be in writing to prevent fraud in the sale of land or an interest in land.

Rescission

Legal action taken to repeal a contract either by mutual consent of the parties or by one party when the other party has breached a contract

Alice, a 17-year old who is engaged to be married Parties entering into a contract must have legal capacity to do so. A person must be at least 18 years of age unless married, in the military, or declared emancipated by the court.

Of the following, who would not be considered a legally competent party?

express contract

Parties declare the terms and put their intentions in oral or written words.

assignee

Party to whom a lease is assigned or transferred.

consideration

Something of value—such as money, a promise, property, or personal services