Real Estate: Understanding Contract
What is a backup contract?
A backup contract is a contract to buy real estate that become effective if a proper contract falls through (doesn't close). For example, Able contracts with Baker to sell a property contingent upon Baker's ability to find financing within 30 days. In the meantime, Abel arranges a backup contract to sell to Collins if Baker fails to obtain financing.
What is a bill of sale?
A bill of sale is a written instrument given to pass title of personal property from a seller to a buyer. It often accompanies real estate transactions where furniture and portable appliances are sold along with the real estate.
What is a binder?
A binder is an agreement, accompanied by a deposit, for the purchase of real estate. The binder shows good faith on the part of the purchaser. In some states, a binder is customarily prepared to guide and precede an agreement. Within a few days (5 to 10, depending on the state), an attorney will draft a contract of sale. For example, Abel gives Baker a binder on a house for sale in New Jersey. Abel then contracts his attorney to prepare an agreement of sale.
The sales contract calls for the closing to be five business days later. What is a business day?
A business day is a standard day for conducting business. It excludes weekends (Saturday and Sunday in the United States) and holidays. For example, on Monday, July 1, Abel agrees to buy real estate. Closing will be in five business days, which is July 9. Since July 4th is a Holiday and July 6th and July 7th fall on the weekend; the fifth business day will fall on Tuesday, July 9th.
What is a closing agent?
A closing agent is a third party (that is, someone other than the broker or sales agent, buyer, or seller) who prepares the paperwork and often conducts the closing or settlement. The closing agency can be a title company, an escrow agent, the mortgage lender, or an attorney.
What is a closing statement or settlement statement?
A closing or settlement statement is an accounting of funds from a real estate sale, made to both the seller and the buyer separately. The statement itemizes the amounts the buyer will pay and the seller will receive. Most states require the broker to furnish accurate closing statements to all parties involved in the transaction. The statement is often prepared by a lender or title company on an HUD-1 form.
What are some common names for a contract for the purchase and sale of real estate?
A contract for the purchase and sale of real estate is the agreement between buyer and seller that spells out the sales price and other terms of the sale, including the date of closing. Most often it is offered by the prospective buyer, usually accompanied by "earnest money" to show good faith and may be accepted or rejected by the seller. When it is signed by both parties, it becomes binding on them. Names for this agreement can vary by the region of the United States but the names most commonly used are: Sales agreement Sales contract Real Estate Contract Purchase Agreement Purchase and Sale Agreement Agreement of Sale Offer and Acceptance Earnest Money Contract
How is personal property sold?
A contract for the sale of personal property need not be in writing; it may be oral. When it is in writing, the agreement is called a bill of sale.
What is a contract?
A contract is an agreement between legally competent parties in which one party agrees to do something (or not do something) in return for consideration (payment) from another party. For example, Jane agrees to pay Marilyn a specific amount for catering the reception for Jane's daughter's wedding. The contract spells out what food, beverages, and services Marilyn will provide and how much Jane will pay.
What is a deposit?
A deposit, also called earnest money, is money paid in good faith the assure performance of a contract. Deposits are commonly used with sales contracts and leases. If the person who put up the deposit fails to perform, the deposit is forfeited unless conditions in the contract allow a refund. Brokers must put deposits in a separate checking account pending completion of the contract. Brokers must not commingle their own funds with clients' money. For example, Elizabeth presented a $1,000 check as an earnest money deposit on a home she would buy, provided she could get a 30-year loan at 5% interest for 80% of the purchase price. The broker deposited the check in an escrow account and refunded it when the contract was terminated because Elizabeth could not arrange the loan.
What is a disclosure statement, and when is one required?
A disclosure statement is a printed document that reveals specified information about something offered for sale. Sellers of a particular kind of real property and investments may be required by law to furnish such a statement to prospective buyers. For example, in the real estate field: - Most states require sellers of real estate to disclose any "dangerous condition." - Some states require disclosure of foundation repairs, termite infestation, earthquake faults, and other issues. - Many sellers of investment interests in real estate are required to disclose their own interest and profit potential. - Seller of timeshare interests must disclose which portions of the project will be retained by the developer, and the costs and conditions of use by timeshare buyers. Timeshare interests five the owner the right to occupy a certain unit for a limited period, such as one (specific) week each year.
What is a dual contract?
A dual contract is the illegal or unethical practice of providing two different contracts for the same transaction, often used in fraud and flipping. For example, suppose Abel wants to purchase a home from a builder for $144,000 but has no cash for the down payment. The builder, acting illegally suggests that they prepare a fictitious contract for $160,000 and try to borrow 90% of $160,000. The bank's attorney discovers the dual contract and explains that they could be guilty of attempted fraud.
What is a hidden defect?
A hidden defect is one that is not apparent from examination of public records or without invasive examination of the property. For example, a secret marriage, forged documents, or the fact that a prior grantor was a minor are some causes of hidden defects in a title. A hidden defect may also be physical, such as underground environmental contamination; it may also be called a latent defect.
What is a meeting of the minds?
A meeting of the minds is an agreement to the exact terms of a contract by all parties involved. It occurs upon acceptance of the offer, including its terms and conditions.
What is a novation?
A novation is a three-party agreement whereby one party is released from a contract, and another party is substituted. A novation is often required in conjunction with assignment of debt contracts. For example, Baker wants to buy Abel's home and assume the mortgage. Abel wants to be release from all mortgage liability. Good Money Savings Association cooperates, and all three parties sign a novation whereby Baker is substituted for Abel on the mortgage. Another use of the word novation is to mean substitution of one contract for another, with acceptance by all parties.
What is a power of attorney?
A power of attorney is a contract in which one person gives another person the right to act for him or her. The power of attorney may be a general (covering all matters) or limited (valid only for specified types of transactions). You may see this abbreviated as POA.
What are some things that may prevent a real estate sales contract from closing?
A real estate sales contract may fail to proceed to closing as a result of: - Breach of contract - Default - Rescission
What is a rider to a contract?
A rider is the same thing as an addendum; it is an addition that rides along with the contract. The term rider is more commonly used in connection with insurance policies, which often include riders to insure specific valuable property (such as jewelry, silver, antiques, or art objects) against loss.
What does a real estate sales agreement (by any name) provide?
A sales agreement is a written agreement between the seller and buyer in which the buyer agrees to buy certain real estate and the seller agrees to sell on the terms of the agreement. For example, Abel's broker prepares an agreement of sale to sell a home to Baker. Both principals sign it. It states that the price of $500,000 is to be paid in cash at closing, subject to Baker's ability to arrange a $400,000 loan at an 8% interest rate, and Abel's ability to deliver good title.
What is a short sale?
A short sale is an arrangement between a borrower and lender through which the borrower sells the property to a third party, and the borrower is allowed to retire the debt with a payment less than the total outstanding principal balance. For example, the Browns have fallen behind on their mortgage payments, and Hometown Bank is threatening to foreclose the loan. Stevens, an investor, urges the Browns to approach the bank and offer to pay off the $160,000 balance with a cash payment of $140,000, thus saving the bank the cost of repossessing and reselling the property. Sevens will then pay the Browns $141,000 for title to the property. Hometown Bank agrees to this short sale, and the deal goes through as planned. Although the Browns no longer own a home, they are out of debt and have cleared $1,000. The loan, having a balance of $160,000. is paid off with only $140,000, leaving the lender short $20,000.
What is unilateral contract?
A unilateral contract is an obligation given by one party contingent on the performance of another party, but without obligating the second party to perform. For example, a broker makes a unilateral contract with her associates. She offers a trip to Hawaii to any salesperson who sells $1 million of property during the month. None of the salespeople is obligated to meet the goal, but the broker is obligated to provide the trip if any salesperson does perform the feat.
What is meant by a valid contract? A void contract?
A valid contract has legally binding force; it is legally sufficient to bind both parties and authorized by law. A void contract cannot be enforced.
What elements are required for a valid, enforceable contract for the sale of real estate?
A valid, enforceable contract for the sale of real estate must have these elements: An offer An acceptance Legally competent parties Consideration (something of value from both parties) Legal purpose Written documentation Description of the property Signature of the principals or their attorney-in fact (legal representative)
What is acceptance?
Acceptance is the act of agreeing to accept an offer. Acceptance of an offer creates a contract. However, any changes to the offer constitute rejection of the contract and substitution of a different contract, known as a counteroffer. This is a new offer to the other party.
What is an addendum to a contract?
An addendum (plural: addenda) is something that is added as an attachment. Another word used for this is rider. Some commonly added addenda in real estate purchase agreements are for financing terms and property inspection requirements.
What is the disctinction between adults and minors? Why is this important?
An adult is one who has reached the age of majority. This is age 18 in most states. 21 in some others. A minor is anyone who has not reached this age. Contracts for the sale or use of real estate entered into by a minor are voidable by the minor. Note, however, that the other party is bound; only the minor may void them.
What is an amendment to a contract?
An amendment is a change, correction, or extension of an agreement that does not change the basic thrust of the agreement. For example, lease amendments might be used to: - Renew the lease for an additional term - Change the percentage rent requirement - Clarify the tenant's defined parking area
What is an arm's-length transaction"
An arm's length transaction is one between parties who are not influenced by their relationship to each other and would not be perceived as having a relationship to each other, and therefore it can be assumed that they are acting in their own best interests. For example, transactions between the following parties would generally NOT be considered arm's length: - A husband and wife - A father and son - A corporation and one of its subsidiaries
What is an assignor? An assignee?
An assignor is someone who assigns or transfers an agreement or contract to another. The assignee is the person who receives the transferred agreement or contract. For example, Davis has an option to buy certain land. She assigns her rights to Baker so that Baker now has the same rights. Davis is the assignor; Baker is the assignee.
What is an attorney-in-fact?
An attorney-in-fact is a person who holds a power of attorney. The attorney-in-fact is authorized to act for another person under the power of attorney.
What is escrow closing or closing in escrow?
An escrow closing is a type of closing where money and documents are put in the hands of the closing agent before closing. At other closings, the seller brings a deed to the closing and the buyer brings money, and these two terms are exchanged simultaneously. Escrow closings are often used in states where a deed of trust is used instead of a mortgage. For example, Elaine sells her land in California to Connie. The title company acts as the escrow agent. Elaine surrenders her deed to the title company, and Connie giver her purchase money to the title company, thus effecting an escrow closing. Neither Connie nor Elaine needs to be present at the closing, as the title company closes in escrow, using escrow instructions.
What is an express contract?
An express contract is a written agreement that includes the elements needed for a valid contract and specific terms of the contract. It is contrasted with an implied (unwritten) contract. For example, an agreement of sale that is in writing, is signed by the buyer and seller, it describes the property, states the price agreed upon, and specified the terms of payment.
Can an offer (or counteroffer) be rescinded, that is withdrawn?
An offer (or counteroffer) can be withdrawn any time before it is accepted. Once it is accepted, it is a binding contract.
What is an oral contract? Is an oral contract acceptable in a real estate sale or lease?
An oral contract is an unwritten agreement. With few exceptions, unwritten agreements in real estate matters are unenforceable. Unwritten contracts for the sale or rental of real estate are unenforceable under the Statute of Frauds. Oral leases for up to a year are often binding contracts.
What does as is mean in a contract?
As is means "in its current state or condition," without any guarantees. This phrase may signal a problem. Premises are accepted by a buyer or tenant in their current condition, which may include physical defects. For example, if a buyer purchases a building as is and then later discovers that the roof leaks, the seller is not legally responsible for repairs.
What is (an) assignment?
Assignment is the method by which a right or contract is transferred from one person to another. To assign is to transfer one's property rights or contract rights to another. Types of contracts commonly assigned are leases, mortgages, and deeds of trust. For example, when an apartment complex is sold, the previous owner assigns the tenant leases to the new owner.
What is a breach of contract
Breach means "breaking." Breach of contract is a violation of all or part of a legal agreement without a legal excuse. Breach of contract allows the non-breaching party (the one who didn't break the terms) to rescind the contract, sue for damages, or sue for specific performance of the contract. For example, Baker contracts with owner Brown to purchase a property. When the closing date arrives, Brown refuses to convey title to the property. Brown's action is not supported by any special condition in the sales contract and therefore constitutes a breach of contract. Baker may rescind the contract and recover his deposit, sue Brown for any expenses and damages incurred, or sue to force Brown to sell under specific performance. Liquidated damages is an amount predetermined by the parties, agreed to be paid to the party injured by the other party's breach.
What is meant by caveat emptor?
Caveat emptor is Latin for "let the buyer beware." It describes a general doctrine in which a buyer must examine the goods or property and buy at his own risk, except for latent defects. In recent years the doctrine has been eroded, especially by the disclosure requirements (about property conditions) introduced in many states. Often a property is offered "as is," with no express or implied guarantee of quality or condition. When entering such transaction, caveat emptor is a worthy admonition.
What are closing (settlement) costs, and what are some typical ones?
Closing (settlement) costs are the various fees and expenses payable by the seller and buyer at the time of a real estate closing or settlement. Some that are typically encountered in a real estate transaction are: - Brokerage Commissions - Lender discount points or other fees - Title insurance premium - Deed recording fees - Loan prepayment penalties - Inspection and appraisal fees - Attorney's fees - Transfer taxes Income (and expenses) that have occurred but not yet received (or paid) are included, designated as accrued.
What is closing or settlement?
Closing, also called settlement, is: - The act of transferring ownership of a property from seller to buyer in accordance with a sales contract. - The time when a closing takes place. For example, Abel agrees to purchase a property from Baker. A closing is sent for June 15, at which time Abel will pay all expenses necessary to acquire ownership and secure financing, and Baker will sign a deed and pay the seller's expenses.
What are contingencies or conditions in a sales contract?
Contingencies or conditions are provisions in a sales contract that some or all of the terms of the contract must be met, or the sale need not be completed. For example, contingencies or conditions may include requirements in areas such as: - Financing: If the buyer can't get a loan on specified terms, there will be no sale. - Inspection: If the property doesn't pass a physical inspection or requires repairs more costly than allowed in the contract, there will be no sale. - Title: If clear title cannot be transferred, there will be no sale. -Appraisal amount: If an appraisal shows that the house is worth less than the agreed price, there will be no sale.
What i s default?
Default is failure to fulfill an obligation or promise or to perform specified acts. For example, a contract may require the buyer to close within three business days. If the buyer fails to appear at the closing, this constitutes a default under the contract; the buyer is in default. Similarly, if a borrower fails to make payments on a loan for three months, he has defaulted on the loan, and the lender can foreclose the property. A delinquency on a loan is falling behind on a payment and is often cured easily. Default on a loan occurs after continued delinquency.
What is the meaning of dissolution of a contract?
Dissolution means "dissolving." Dissolution of a contract or agreement means termination of it. Dissolution may occur as a result of: - Nonperformance: A party failed to perform as contracted. - A court order: A court that has the appropriate authority determines the outcome. - Agreement of the parties: Both parties agree to terminate or dissolve the contract.
What is due diligence?
Due diligence is making a reasonable effort to perform under a contract. For example, a prospective home buyer who signs a sales contract contingent on sale of his or her present residence is expected to use due diligence in marketing that property. Making a reasonable effort to provide accurate, complete information. A due diligence study often precedes the purchase of property, it considers the physical, legal, and social characteristics of the property and expected investment performance. For example, a pension fund might send various experts to perform a due diligence study of a property it is considering for purchase. Matters to be considered would include the mechanical and electrical systems of the building, local market rental conditions and competition for the property, and environmental hazards. Examination of property to detect the presence of contaminants. For example, before lending on a shopping center, a lender may insist on an environmental examination as part of its due diligence. i.e. Crownbrook Housing Restoration Project
What is escrow?
Escrow or an escrow contract is an agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping pending the fulfillment or performance of a specified act or condition. The most common use of escrow in real estate transactions is for the earnest money deposit, which the broker must place in a separate checking account until the contract is either fulfilled or expires. If the contract is fulfilled and the sale closes, the seller receives the deposit; if the conditions of the contract are not met, the deposit is refunded to the prospective buyer, provided the contract doesn't state otherwise.
What elements are necessary for a valid contract?
Every contract must have at least these elements" Offer and acceptance (meeting of the minds) Subject matter Competent parties Consideration (Mutual obligation to give something) Legal purpose
What is flipping?
Flipping is the purchase and immediate resale of property (within hours or days) at a quick profit. Flipping often has a negative connotation, attributed to shysters who profit illegally or at the expense of an innocent party. A dual contract is often used to hide the practice of flipping.
Can a seller who is under a contract of sale prepare an amendment for example, to delay closing by a week?
For an amendment to a contract to be binding, both parties must agree to it.
What is an incompetent?
In legal terms, someone who is incompetent is not legally capable of completing a contract. Minors and those who are mentally ill or senile are among those considered incapable or incompetent. For example, a mentally retarded individual has inherited $100,000 and wants to buy a tract of land. He enters into a contract, but his legal guardian voids it because the land is worth less than $5,000. The $100,000 contract is not enforceable because the buyer is incompetent.
What is the difference between puffing, a mistake, misrepresentation, and fraud?
In the context of contracts, the distinction is primarily based on the intent of the person who makes a false statement. - Puffing is often harmless chatter, such as saying "This house has one of the best backyards in the world." - A mistake is an unintentional error made in preparing a contract; if all the parties agree, it may be corrected without voiding the contract. - A misrepresentation is an untrue statement, whether unintentional or deliberate. It may be a form of nondisclosure (perhaps inadvertent) where there is a duty to disclose, or it could be the planned creation of a false appearance. If there is misrepresentation of material fact, the injured person may sue for damages or may rescind the contract. Fraud is the intentional use of deception to cause another person to suffer loss. Fraud is often punishable, the severity depending on state law.
What is meant by latent defect?
Latent defects are flaws that are hidden but are likely to surface later. Latent defects are an exception to the principle of caveat emptor. For example, a building is found to have latent defects in the form of poor construction of subfloors and improper foundation support. If the defect was not disclosed to the buyer before purchase the seller may be liable, even if the buyer bought the property "as is."
What market forces determine market value?
Market forces determining market value are supply and demand. That is, market value reflects a balance between the quantity of something that is demanded at a given time and price and the quantity supplied at that time and price.
Is any special preprinted form required for a valid real estate contract?
No. Any form that contains the necessary elements of a real estate contract will do. A contract does not even have to be typed; it can be handwritten. Some states, however, require a real estate licensee to use either a specific preprinted form or the services of an attorney. The advantage of a preprinted form is that it reduces the risk that some elements of the contract may be omitted or misinterpreted.
Is buying real estate just like buying goods in a retail store?
No. In a retail store, all or most goods have a price set by the merchant. Although the customer can sometimes negotiate a lower price, in most cases the price is fixed, and the customer can take it or leave it. In real estate, the asking price set by the seller is often just the starting point, and the seller expects a negotiation process.
Must the recipient of a power of attorney be an attorney-at-law?
No. No professional qualifications are required to receive a power of attorney. The recipient of a power of attorney may be referred to as an attorney-in-fact, which is distinguished from an attorney-at-law.
Is an amendment to a contract the same as an addendum?
No. Usually an addendum is prepared with the original contract, while an amendment is a later change.
Elaborate Mortgage and mortagee; my friend said he bought a house and got a mortgage. Does that make him a mortgagee?
No. Your friend who bought a house got a loan. He gave a mortgage to the lender, which pledges the property he bought as collateral for the loan (which is consequently referred to as a "mortgage loan"). Thus, your friend is the mortgagor, and the lender who received the pledge of property as collateral (the mortgage) is the mortgagee.
What is parol evidence?
Parol evidence is oral evidence, as opposed to that contained in documents (written). The parol evidence rule states that when parties put their agreement in writing, all previous oral agreements merge into the written agreement. The written agreement cannot be contradicted by oral testimony, unless there was a mistake or fraud. The term parol, like parole (in the context of prison), is derived from the French word for "to speak." To remember its meaning, it might be helpful to associate it with parol (someone's word or oath) and parley (oral discussion or conference).
What is meant by performance of a contract?
Performance is the completion of the duties and obligations specified in a contract. For example, Patty, the tenant, and Bruce, the landlord, agree on the terms of a five-year lease. Both parties abide by the lease for the entire five years. The lease expires upon performance of the parties upon the end of the full five-year term.
What is the difference between real estate (real property) and personal property?
Real estate or real property is everything more or less permanently affixed to land. Personal property is everything else. Real estate includes buildings and land. Personal property includes vehicles, jewelry, securities (stocks and bonds). Sometimes there are disputes. Common sources of dispute are chandeliers, window treatments, built-in appliances, and crops.
What does a closing statement or settlement statement look like?
Reference attached picture
What is rescission?
Rescission is the act of rescinding, that is, withdrawing, canceling, or terminating (a contract). Rescission is allowed when the contract was induced by fraud, duress, misrepresentation, or mistake. Additionally, Regulation Z allows to rescind certain credit transactions within three business days, and purchasers of certain land that must be registered by the Department of Housing and Urban Development (HUD) may rescind within three business days.
Can any contract be assigned?
Some can, some can't. Assignment does not release the original party from obligation. Debts and other obligations are generally not assignable without permission from the party to which they are owed. A novation is often used to release one party and transfer obligation to another party. For example, if you sell your house and the buyer wants to assume your mortgage, this will not be possibly by assignment; you cannot assign your debts. To be release from obligations of the loan, you must get permission from the mortgage lender. Most mortgage loans are not assumable without the lender's permission.
What is specific performance?
Specific performance is a legal action in which the court requires a party to a contract to meet the terms of the contract when they have refused to fulfill their obligations. When you sue for specific performance, you are suing to force the other party to do what they said they would do. Specific performance is often permitted by courts in real estate matters because each parcel of real estate is unique or nonhomogeneous. For example, Baker agreed to sell his house to Abel. Baker changed his mind when his adult daughter decided to buy the house. Baker offers to refund Abel's earnest money deposit and pay living expenses for one month, but Abel insists on buying the house as agreed and will sue for specific performance if Baker refuses to sell.
A seller thought that the prospective buyer might default on the sales contract, so he tendered the deed and demanded payment. What does tender mean here?
Tender has several meanings in real estate. In this case it means to pay or deliver. It can also mean: - To perform under a contract. For example, offering money or rent under a lease. - An offer to perform an obligation, together with actual performance or evidence of present ability to perform; for example, offering to pay a debt that has been demanded.
What is the Statute of Frauds?
The Statute of Frauds is a state law that provides that certain contracts must be in writing in order to be enforceable. It applies to deeds, mortgages, and other real estate contracts, with the exception of leases for periods shorter than one year.
What is an asking price? What is negotiation?
The asking price is the list price that an owner would like to receive. Negotiation is the process of bargaining that precedes an agreement. Through negotiation, the prospective buyer often causes the seller to accept a sale price lower than the asking or listing price.
What is the closing date or settlement date?
The closing or settlement date is the date on which the seller delivers the deed and the buyer pays for the property. The sales contract generally states this date, at which time the parties will meet and settle all accounts necessary to transfer the title to the property. Closings are commonly held at a title company, attorney's office, bank, or mortgage company.
What is a duty to disclose?
The duty to disclose is the legal requirement of a seller, broker, or agent to tell a prospective buyer or other interested party about a negative condition. For example, the following may impose a duty to disclose - Foundation cracks - Termite infestation - Hazardous construction materials - Hazardous materials in the environment, such as contaminants from a leaking underground storage tank
What are some common examples of contracts in real estate?
The following are examples of contracts in real estate: Listing agreement Sales agreement Deed Mortgage Land contract, installment contract, contract for deed Lease Assignment Option Exchange
What are the parties to a contract called? What are some abbreviations used in contracts?
The parties to a contract are called principals. Some abbreviations commonly used in contracts are" Et al. - Abbreviation for Latin et alii, for "and others." Et con. - Abbrev. for Latin et conjunx, "and husband." Et ux. - Abbreviation for Latin et uxor, "and wife."
What is a bid? What is an offering price? A purchase offer?
They are all the same things. A bid is the amount someone is willing to pay for something that is offered for sale. In the case of real estate, this is the same thing as an offering price or purchase offer.
What is the clause, found in some contracts, that gives the party the right to terminate the contract upon a certain event?
This clause is the cancellation clause, which is a contract provision that gives a party the right to terminate obligations if specified conditions or events occur. For example, a cancellation clause in a lease may allow the landlord to end the lease upon the sale of the building so that the new building owner is not burdened by an unwanted tenant.
What is the meaning of time is of the essence in a contract?
Time is of the essence is a phrase commonly inserted in contracts. Its effect is to require that all specific dates and times referenced in the contract be interpreted exactly, In the absence of this phrase, delays might be acceptable. For example, a contract that states that time is of the essence may require a very strict interpretation of the time provided for the buyer to arrange financing and the date set for the closing. If these terms are not met, the other party may assert that the contract is void.
What is a legally competent party?
To be legally competent to buy or sell real estate, a party must be - mentally capable - of legal age (18 in most states) Duress may void a contract. A party has been told, "your signature or your brains on this contract" has been under duress to sign. Duress defined as threats, violence, constraints, or other action brought to bear on someone to do something against their will or better judgement.
What is a legal purpose in a contract?
To be valid, a contract must have a legal purpose, that is, it must not obligate either party to do something illegal. Most contracts are for legal purposes. However, a contract to pay a hitman to murder a person would not be legally enforceable because its purpose is not legal. A contract giving land to a municipality for a park for use by whites only would not have a legal purpose because racial discrimination is against public policy.
What is consideration in a contract? What is good consideration? Valuable consideration?
To be valid, a contract must include consideration, which is anything of value given to induce entering into a contract. It may be money, personal services, a product, or intangibles. Good consideration is founded on generosity, affection, or moral obligation. Valuable consideration is something of value, such as money, property, or time. For example, the owner of a tract of land may convey it to a city for consideration of one dollar, or parents may cite "love and affection" as the consideration in transferring a home to one of their children.
What is meant by an executed contract?
To execute a contract is to sign it, so an executed contract is one that is signed by all the principals. Generally, when a buyer and seller sign a sales contract, they execute it. Executory means that it has not been executed. Something is left to be done.
What is meant by forfeiture?
To forfeit is to give up or abandon. Forfeiture is loss of money or anything else of value because of failure to perform under contract. For example, Baker, a prospective purchaser, fails to keep up payments under a land contract and thus forfeits his rights to the property.
What is the meaning of rescind?
To rescind is to withdraw (an offer or contract). For example, Abel offers to buy a certain house from Baker. Before Baker accepts the offer, Abel rescinds it and therefore is not obligated to follow through on the purchase.
What is meant by void?
Void means having no legal force or binding effect; to void something is to render it void. For example, suppose a listing contract stipulated that the property could be sold only to a person of a certain race. Since the stipulation is contract to anti-discrimination laws, that particular clause is void and therefore unenforceable.
What is meant by voidable?
Voidable means capable of being voided (declared void), but not void unless action is taken to void it. A voidable contract is one that can be voided by one or both parties. Often only one party has the right to void it, while the other party is bound by its terms. For example. a real estate contract entered into by a minor is voidable only by the minor. If a landlord leases an apartment to a minor, the minor may honor the lease and rent the apartment, in which case the landlord is bound by the lease. If the minor decides not to rent the apartment, however, he or she may void the lease without liability for performance. The lease is a voidable contract, voidable only by the minor.
What is the meaning of the suffixes -or and -ee?
Words ending in -or signify the giver of something; words ending in -we refer to the recipient. For example, a grantor gives a deed to a grantee. A vendor is the seller; the vendee is the buyer. An offeror makes an offer to the offeree. A lessor gives a lease; the lesee is the tenant. A donor makes a donation; the donee receives it. Another example, the mortgagor is the one who gives the mortgage, and the mortgagee receives it, but this may not mean what you think as elaborated on the next card,
Can anyone other than the owner sign a deed or sales agreement?
Yes. A person having a valid power of attorney in writing from the owner or a trustee may sign the deed or sales agreement.
Must a ontract for the sale of real estate be in writing to be enforceable?
Yes. Because of the economic importance of real estate, laws that evolved years ago require a contract for the sale of real estate to be in writing to be enforceable. A real estate contract must also include a description sufficient to locate the property.
