SEC.6 real estate contract law unit.1

Property owner Easton West, 50, had offered his three-bedroom, three-bath home as a lease-option. Buyer Jim Jarmashian, 34, was sold on the idea, because he wouldn't be financially able to buy until the following March (10 months from the date they signed the lease-option agreement), when he turned 35, and the trust fund from his grandparents would be available to him. Easton and Jim have signed the written agreement—which was drawn up by a lawyer experienced in dealing with lease-options—and now it's a waiting game. Which type of contract is this?

Executory This contract is in progress and is therefore considered executory.

Gangster Mal Mapone needs to dispose of a particularly gabby former business associate, Benny the Bird. He agrees to sign over the title to an old property he owns to Johnny in exchange for Johnny's promise to make Benny disappear. What type of contract is this?

Void This contract is for an in illegal purpose and is therefore void.

which section/part of the essential contract elements makes the contract valid through the offer.

The terms of the contract

Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have?

A contract involving an exchange of promises or other consideration between two parties is a bilateral contract.

What is the statute of frauds?

A law requiring contracts conveying ownership in real property to be in writing to be enforceable

Specifies the date by which the performance of the contract needs to be completed. Indicates the deadline by which contract terms must be met. which contract clause?

time of the performance

T or F If one part of the contract is found to be void or unenforceable, the severability clause points out that the remainder of the contract isn't affected.

true

T or F The choice of law clause indicates which law or laws will be used to interpret the contract provisions.

true

Property owner Judy offers to pay a 4% commission to any licensee who brings her a buyer for her two-bedroom, one-bathroom house. Stan, a licensee, can bring her a buyer to earn the commission, but he's under no obligation to do so. unilateral or bilateral?

unilateral because only one person is obligated to act, and in this scenario, that person is Judy.

What is a legally competent party?

Someone who has the legal and mental capacity to enter into a contract A legally competent party is a party that has the capacity (legal and mental) to enter into a contract.

Henry wants to submit an offer for Lacy's house. Under the statute of frauds, what is something that is NOT a requirement he needs to meet for his offer to become an enforceable purchase agreement?

The contract being notarized. In order to turn a verbal offer into an enforceable purchase agreement, the contract must be in writing. In addition, the terms and conditions must be stated, and the seller must sign the contract.

Reasonable Time

What happens if there isn't a specific acceptance or delivery date outlined in the contract? "Reasonable time" is the phrase typically used, but this can be interpreted differently by the parties to the contract.

executory contact

A contract in progress; one or more terms of the contract remain undone.

What's it called when all parties sign a contract, but before the seller's acceptance is delivered to the buyer?

Acceptance Acceptance occurs when all parties have signed a given contract.

Acceptance

Acceptance occurs when all parties have signed a contract

Property owner Mike Mapousch, 31, and buyer, Kimberly Oh, sign a written real estate contract for Kimberly to purchase Mike's house for $250,000. The contract contains both the legal description of the property and its street address. They both agree on the price and terms of the contract and sign it. In the contract, Kimberly stated that she would provide $10,000 in earnest money by a certain date but failed to do so. What type of contract is this?

voidable Because Kimberly failed to meet the terms stated in the contract regarding the delivery of the earnest money, Mike has the option of terminating the contract. Kimberly's actions have made the contract voidable.

Statute of Frauds Requirements

-The essential terms and conditions of the contract must be present. -Contracts conveying the ownership or interest in real property must be in writing. -The contracting parties must be identified. -The contract subject matter must be clearly identified.

Contract Clauses

A clause is a specific section within a contract. Each clause addresses a specific point of law or aspect of the agreement. Contract clauses can cover nearly any business or transactional issue.

executed contract

A contract in which all the parties have met all terms of the contract.

unilateral contract

A contract in which consideration (such as a promise) is only given by one party to the other.

invalid contract

A contract in which one or more of the essential elements is missing.

Valid Contract

A contract that contains all the essential elements.

implied contracts

A contract that is based on the actions or behaviors of the parties, not on words.

Voidable Contract

A contract that may be cancelled by one or more parties for one of several reasons. It may be missing an essential element and thus invalid; it may contain a mistake or a misrepresentation, or it may have been created or executed by a party under duress.

Unenforceable Contract

A contract that will not hold up in court.

enforceable contract

A contract that will stand up in court.

Void Contract

A contract with no legal force or effect.

Bilateral Contract

A mutual contract that involves an exchange of promises or other consideration between two parties.

express contracts

A stated (written or oral) agreement between two parties to specific terms.

Sylvia, 15, and her neighbor, Marge, 24, agree that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

A voidable contract appears to be valid but because of legal principal, one or both parties have the right to rescind the contract. In this case Sylvia can enforce the contract against Marge but Marge cannot enforce against Sylvia.

Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?

Arbitration An arbitration clause in a contract specifies that any contract disputes will be settled through arbitration, rather than through the court system.

Banker Olivia Pope agrees to lease her four-bedroom, four-bath country home to author Fitz Grant for $2,000 a month. Both parties have specific obligations under the terms of their written lease.

Bilateral, cause its something they both agreed upon

Binding Acceptance

Binding acceptance occurs when the accepted (signed) offer is delivered according to the delivery procedures outlined in the contract, including the deadline for delivery.

sales contracts

Express Bilateral Valid (in writing, for starters) Enforceable Executed or executory

To meet the requirements of the statute of frauds, an agreement must clearly identify the contract's subject matter, present the contract's essential terms and conditions, and ______ to be enforceable.

Identify the contracting parties The statute of frauds requires that the contracting parties be identified in the agreement, and that both parties sign the agreement to make it legally enforceable.

Releases one or more parties from liability or loss. which contract clause?

Indemnification

Which clause in a contract states that one or more parties won't be held liable if there are losses or expenses related to the contract?

Indemnification clause An indemnification clause is a contractual shift of liability and obligations off of a given party.

Allows the aggrieved party to collect reasonable damages, even if damages are hard to calculate.

Liquidated damages:

Time Is of the Essence

Many real estate contracts contain the phrase "time is of the essence" to prevent unnecessary delays to the process that may harm the parties. This is different than "reasonable time," and means that the parties will be held to strict compliance with the time frames specified in the contract. However, it can also mean that the parties are agreeing to proceed in good faith and not unduly delay the process.

Elements of a valid contract

Offer and acceptance Consideration Legal competence Legal purpose Consent

Notifies the parties that even if one part of the contract is found invalid, the other parts of the contract can be valid and enforceable States that portions of the contract are enforceable even if one part is not. which contract clause?

Severability

Sometimes contracts don't contain specific dates or times telling the parties when obligations must be met. In these situations, the parties are expected to complete their contractual obligations within a reasonable time. What is meant by "reasonable time"?

The parties must make assumptions about the time frame in which they must meet their contractual obligations.

which section of the essential contract elements contains the consideration.

The property price

Tom and Jim are neighbors. Jim wants to buy Tom's rental property. In the contract that Tom and Jim sign, Jim is identified only as "the neighbor." Which statute or contract element does this violate?

The statute of frauds requires not only that a contract to convey property be in writing, but also that the contract identify the parties to the contract.

Warren signed a contract with the Samsons for the sale of property he didn't own. What type of contract is this?

Void A party can't promise to do something impossible in a contract. Doing so makes the contract void.

You sign a contract to purchase a machine that will allow you to travel back in time and meet Abraham Lincoln. What type of contract is this?

Void A party can't promise to do something impossible in a contract. This contract is void because the inventor of the machine literally can't perform his side of it.

As part of the sales contract, Garth, the seller, was supposed to provide a copy of the seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is this?

Voidable A voidable contract can be cancelled by one or more parties because it's missing an essential element. In this situation, Melanie, the buyer, has the right to cancel the contract and have her earnest money refunded.

Ken signed a contract to purchase Debra's condo. Ken signed the contract two weeks prior to turning 18, which is the age of majority in their state. Debra found out about his age prior to the closing but honored the contract and they closed on the condo a month after Ken's birthday. What was the status of the contract when Ken and Debra entered into it?

Voidable Because Ken was a minor when he entered into the contract, he has the option to cancel it (making it a voidable contract). However, the parties to a voidable contract may choose to execute it, which is what happened here.

When does offer and acceptance occur?

When both parties sign a contract with full understanding of the terms Offer and acceptance, also known as mutual agreement occur when the parties enter into the agreement with a full understanding of the contract terms. When both parties sign the contract, they are indicating they understand and agree to the terms.

Hannah and Tarik accepted a purchase offer for their large home. The buyer's agent delivered a signed purchase contract to Jon, their listing agent, with an acceptance deadline of September 10, and a delivery deadline of September 15. Hannah signed the contract on September 8, but Tarik was on a business trip and couldn't sign until the 10th. Jon delivered the signed contract to the buyer's agent on September 16. Is this contract binding?

You realized that the delivery date is what makes the contract binding. therefore by this one day being late this contract is not binding. It may be just an acceptance if the buyers agent does accept so

Specifies that contract disputes will be settled through arbitration rather than through a lawsuit. which contract clause ?

arbitration

Points out that the contract will be interpreted under the laws of the given jurisdiction.Describes the law under which the contract will be interpreted. which contract clause?

choice of law

Sherman K. "Shep" Watson, 53, had fallen into a sweet deal when he'd been transferred to the city from Podunkville, Missouri, seven months earlier. He'd signed a lease-option agreement with traveling salesman, Francis Keane, on Keane's three-bedroom, three-bathroom home on a one-acre ranch just outside the city limits. Shep and Francis negotiated and agreed on the contract, and when the seven-month lease portion of the agreement was up, the two finalized the purchase. The property title went to Shep, the purchase price went to Francis, and everyone lived happily ever after. Which type of contract is this?

executed, This contract has been signed, sealed, and delivered.

T or F The time of performance clause tells the parties the time frame in which a lawsuit related to the contract can be filed.

false

T or F The arbitration clause states that arbitration isn't a legal alternative to mediation or litigation in the event of any contract disputes.

false

States the time frame in which a party can file a lawsuit relative to the contract.Specifies the deadline past which lawsuits related to the contract can no longer be filed. Which contract clause ?

statue of limitations

Two drunk people, Earl and Merle, agree to swap houses—Earl's nice house on the Gulf for Merle's run-down shack in the middle of nowhere—if the Cowboys win their next three games. They write up the contract on a piece of paper and each sign it, with the bartender as their witness. They all drink to football, and within two hours, Earl and Merle are dragged off by the cops for being "drunk and disorderly." What type of contract is this?

void, This contract is void because neither party is sober and therefore not considered competent.

Rex needs to handle some money he acquired during an ... ahem ... unsavory business deal. He agrees to sign his boat over to his colleague, Ben, if Ben can launder the money and return it to Rex as part of a legal business dealing. What kind of contract do Rex and Ben have?

void, A contract for an illegal purpose is void!