Valid Contracts

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

a

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

T

means that the contract cannot require any illegal activities or outcomes

lawful objective

What is the difference between reality of consent & offer & acceptance?

- offer and acceptance speaks to the complete and unreserved agreement of terms and consideration - reality of consent focuses on the fact that the agreement was arrived as a voluntary act of good faith

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. what elements of a valid contract are missing?

1. Josh is not a legally competent party because he is a minor 2. since Michael knew about the bad alternator, it can be argued that he fraudulently misrepresented the condition of the car. Reality of Consent would have been non-existent

T/F - In a real estate contract, the exchange of promises acts as consideration

True - the buyer promises o pay the purchase price for the property, and the seller promises to transfer the deed

A representative with power of attorney is called what?

attorney in fact

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

b

This is a term you'll hear for a promise to NOT do something

forbearance

When Real Estate is gifted in exchange for good consideration - usually seen in transactions where property is given to a relative - what term is used to describe he conveyance?

gift deed

this can be acceptable in lieu of valuable consideration ina valid contract

good consideration (goodwill) such as love & affection

Seth provides cameron with housing. Is this a contract?

no - 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

the fully agreed upon exchange of promises by the parties - another way of describing the meeting of the minds that should occur for a valid contract to come about

offer & acceptance

T/F - 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.

t

You walk into a restaurant, & sit down. is this a contract?

this could be considered a bilateral implied contract

T/F - 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.

true

T/F - When a contract contains lawful objective, it takes all necessary laws & statutes into consideration

true

T/F - in Real estate, we use express contracts almost exclusively

true - this type of contract is enforceable by law

What are the five esential elements of a legally valid contract?

1. offer & acceptance 2. consideration 3. legally competent parties 4. reality of consent 5. lawful objective

for a contract to be valid and legally enforceable, the parties involved in the contract must be legally competent. Legal competency implies what two things?

1. the individual has reached the age of majority (18 in Georgia) or had their disabilities of minority removed by court 2. the individual is not mentally incompetent or intoxicated by drugs or alcohol

T/F- 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.

TRUE

a contract created by a seller who wishes to sell a property that has been declared hazardous by the EPA due to a leaking underground storage tank would this be considered a void contract? Why or why not?

Yes - this contract would be void. the property cannot legally be sold in this condition. -A buyer who purchased this property and learned of the condition afterward could back out of the agreement because the contract was void from the beginning

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

a

If consideration 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

why would earnest money not be a consideration?

because it is evidence of good faith to fulfill a promise, but is not the promise itself

something valuable that each party exchanges in order to demonstrate hat they agree to the contract's terms

consideration

A legally enforceable and binding agreement between parties wherein a promise to do or not do something is given in exchange for valuable consideration

contract

In order to contract with a person of unsound mind, you would need to do what?

contract through someone with power of attorney for the incapacitated individual.

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

d

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

d - Bob buying Sue's motorcycle "as-is" because she doesn't really know its true condition is an example of reality of consent. 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.

T/F- without consideration, a contract is not legally binding

t - the legal philosophy is that a person cannot do something of value without receiving something of value in turn

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. What is this an example of

valuable consideration

a term to describe consideration that is deemed sufficient or appropriate for that which is offered in exchange

valuable consideration