MY UNIT THREE: INTRODUCTION TO CONTRACTS

Voidable

- Contract with contingency - Contract with a minor

Valid

- Written lease option contract - Oral lease for six months - Written lease for one year

Explain why an open listing is considered a unilateral contract.

Most open listings only have the seller promising to pay a real estate agent for producing a buyer. An agent makes no promises to find a buyer.

Using the two listings, explain which one is a unilateral contract and which is a bilateral contract.

Open listing is unilateral; exclusive right to sell is bilateral.

Unenforceable

Oral contract to buy a farm

A potential buyer offers to purchase the sellers' real property for $10,000 less than the listed price on a TREC-promulgated One to Four Residential Contract. The seller responds by signing the contract and transmitting it to the buyer's agent. What is the seller's response called?

The answer is acceptance. An acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror.

A contract is said to be implied if the

The answer is agreement of the parties is demonstrated by their acts and conduct. In an implied contract, the agreement of the parties is demonstrated by their acts and conduct. For example, when someone enters a restaurant and orders a meal, there is an implied contract that the customer will pay the bill when it comes.

Once a sales contract is completed with all parties fulfilling their promises, the ownership changing hands, and the seller receiving the sales price amount, the sales contract is

The answer is an executed contract. At closing, after the seller has conveyed the property to the buyer and the seller has received the sales price amount, the contract is considered an executed contract.

Which of the following is an example of a unilateral contract?

The answer is open listing agreement. An open listing agreement is an offer by the property owner to compensate the first agent that produces a buyer; the agent makes no promises.

Executed Contract

A contract in which all parties have fulfilled their promises

Bilateral Contract

A contract in which both parties promise to do something

Executory Contract

A contract in which one or both of the parties still have an act to perform

Unilateral Contract

A contract where only one party makes a promise

Void

Contract with forged name

Look at TREC Contract 20-14, One to Four Family Residential Contract (Resale). Review the contract closely and pick at least three paragraphs that could make the contract voidable under which the buyer may terminate.

Paragraph 7B2, failure to timely give sellers disclosure Paragraph 6B, failure of the seller to timely provide commitment Paragraph 6D, failure to timely cure objections Paragraph 7E, lender-required repairs Paragraph 7F, completion of repairs and treatments Paragraph 14, casualty loss Paragraph 23, termination option

In the Seller Financing Addendum TREC NO. 26-7, does the buyer or the seller have the option to terminate?

Seller may terminate. Text that makes contract voidable: "If the credit documentation is timely delivered, and Seller determines in Seller's sole discretion that Buyer's credit is unacceptable, Seller may terminate this contract by notice to Buyer within 7 days after expiration of the time for delivery and the earnest money will be refunded to Buyer."

A legally enforceable agreement under which two parties promise to do something for each other is classified as

The answer is a bilateral contract. A contract is bilateral if both parties to the agreement promise to do something in exchange for the other's promise to do something.

A revocation is when

The answer is an offeror revokes their offer before acceptance by the offeree. A revocation is a rejection by the offeror of an offer before it is accepted by the offeree. An example is if a buyer gives a seller three days to accept an offer, and on the third day the buyer's broker calls the seller's broker and cancels the offer. At that point, the offer is void.

The essential elements of a contract include all of the following EXCEPT

The answer is earnest money. To be legally valid, a contract does not require earnest money. Consideration can be the mutual exchange of promises.

A contract that complies with all the basic requirements may still be voidable. To be valid, the contract must have

The answer is mutual agreement. A contract must be entered into by mutual agreement. It means that there must be a "meeting of the minds"; that is, there must be complete agreement between the parties about the purpose and terms of the contract.

A person approaches an owner and says, "I'd like to buy your house." The owner says, "sure," and they agree on a price. What type of contract is this?

The answer is unenforceable. An oral contract may be valid if all parties continue to agree, but it is not able to be enforced. The statute of frauds requires that real estate contracts be in writing.

When a contract appears to be valid on the surface, but neither party can sue the other to force performance, it is

The answer is unenforceable. There is a distinction between a suit to force performance and a suit for damages, which is permissible in an oral agreement. An unenforceable contract is said to be "valid as between the parties." This means that once the agreement is fully executed and both parties are satisfied, neither has reason to initiate a lawsuit to force performance.

Define the difference between a unilateral contract and a bilateral contract.

Unilateral - one promise; bilateral - exchange of promises