Section 17 Unit 1 Essential Contract Elements

Which of the following statements about electronic signatures in Washington is true?

A digitally signed purchase and sale agreement is considered an original document.

What is the statute of frauds?

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

Doris and Kathleen, who are neighbors, enter into an agreement to not permit their real estate agents to sell their homes to families with children. This agreement lacks ______, so it's void.

A lawful objective

legally competent party

A party who has the capacity (legal and mental) to enter into a contract Ex. The judge decided that Sylvia, who suffered from dementia, was not a legally competent party and therefore could not enter into a contract to sell her house. Ok

offer and acceptance

An agreement between the parties; a meeting of the minds Ex. When a buyer agrees to buy and a seller agrees to sell and all terms are agreed to, this is an offer and acceptance. Ok

consent

An essential element of a contract meaning it must be entered into as a free and voluntary act, without undue influence or duress. Ex. Even though he wanted to keep the property he'd inherited from his mother's family, Roger was forced to sell (and did not give consent) when his father demanded the property be sold—and that he would be keeping Roger's profits.

Bryce wants to make an offer on a house, but his financial institution won't give him the interest rate he wants.

Consent still exists

Jill can't quite afford the down payment on the house she wants, so her aunt loans her $10,000. Jill makes a written offer on the house.

Consent still exists

Bill and Mindy, who are neighbors, get into a disagreement about late-night noise. The two come to an agreement: Bill promises to stop having loud parties and Mindy promises to keep her dogs inside after 10 p.m. Their promises represent the ______ in their agreement.

Consideration

Carl and Sadie, who are neighbors, got into a disagreement about early-morning noise on the weekends. The two came to an agreement: Carl promised to not mow the lawn before 10 a.m., and Sadie promised to put bark collars on her dogs in the early morning hours. Their promises represent the ______ in their agreement.

Consideration

Who must agree to conduct a transaction via electronic methods for electronic signatures and documents to be considered valid?

Each party to the transaction

"Voluntary Agreement" means the same thing as "under duress."

False

A minor who enters into a contract to purchase real estate has contractual ability.

False

Although electronic contracting is supported by law, it's expensive and time consuming and should only be used in limited situations.

False

Contracts are valid as long as at least one party has agreed to it voluntarily.

False

Which of these is an example of good consideration?

Gifting a house to a family member

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

Alex, a high school freshman, started a neighborhood lawn care business. Simone decides to hire Alex to mow her lawn every two weeks. Alex presents Simone with a written contract outlining the services to be provided and the fee Simone will pay. Which of the following is true in this situation?

If both parties are content to uphold their agreement, the fact that it's not legally binding doesn't matter.

Shelly's uncle, who manages a condominium complex where Shelly owns a condo, tells Shelly that if she doesn't sell her house to his friend, something may happen to her condo.

Invalidates consent

The information in the contract lists that the property for sale is 5200 sq. ft. when actually, it's 2500 sq. ft.

Invalidates consent

The contract subject matter must be clearly identified.

Is a requirement

The contracting parties must be identified.

Is a requirement

determine if it's a requirement under the statute of frauds. The essential terms and conditions of the contract must be present.

Is a requirement

In addition to the written contract, there must also be an audio recording of an oral agreement between the contracting parties.

Is not a requirement

In contract law, a "legally competent" party has the ______ to enter into a contract.

Legal and mental capacity

Five elements are required for a valid contract:

Legally competent parties Offer and acceptance Consent Legal purpose Consideration

Seller Tad has found a buyer, Minnie, for his property. The two of them are about to enter into a contract when Tad receives an email from Minnie. Turns out that Minnie's co-worker used to date Tad and told Minnie he'd cheated on his construction contractor licensing exam. Minnie threatens to spill the beans unless Tad comes down $10,000 on the sales price. Tad reluctantly agrees and they sign the contract. What is true about this situation?

Minnie used duress against Tad, so the contract is invalid.

Louellen is about to take out a mortgage loan from her credit union. The contract includes the following information: Louellen is offering her house as consideration, and the credit union is offering $350,000; and Louellen will pay the loan back over a certain number of months at a certain rate. Both Louellen's signature and the credit union representative signed it. What, if anything, is this contract missing in order for it to be legally binding, according to the statute of frauds?

Nothing is missing.

According to the statute of frauds, which of the following agreements needs to be in writing to be legally enforceable?

Pam agreed to rent her house to Miguel for three years. Anything over 1 year should be in writing

Charlie and Marie, your clients, have owned their house for 45 years. They've decided to sell and move to be closer to their daughter. When the buyer submits an electronic offer, Charlie and Marie refuse to sign electronically. What must you do?

Provide hard copies for their signature

Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he rarely used the cabin and was thinking of selling it. Drew said that he'd buy it from Hank for $80,000, which Hank agreed was a fair price. It's two months later, and Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable?

Real estate contracts must be in writing. The statute of frauds requires that real estate contracts be in writing. Drew's offer was oral and thus didn't create an enforceable contract.

Rhoda has power of attorney for her father, Winston, who is 85 and has a heart condition. Over the years, she's made recommendations to him about which properties he should buy and sell. She asks her father to please invest in her new restaurant, but Winston declines. He thinks it's too risky. Rhoda is furious and tells him that she will no longer take care of his financial matters. So Winston, with nowhere else to turn, gives her $20,000 as a loan, and he signs a contract under those terms. Later, Rhoda's restaurant fails. Winston goes to court to get his money back, but Rhoda produces a contract that says that the money was an investment, not a loan. Winston said that he thought he signed a contract that made the money a loan. Which of the following statements about this situation are true? Select all that apply.

Rhoda had undue influence over her father, so Winston's consent was invalidated. Rhoda's actions have given Winston the power to void the contract. Exactly right. Consent wasn't possible in this situation.

Per the statute of frauds, which of the following agreements does NOT have to be written down in order to be legally binding?

The Lees rent out their basement to some college students for three months. While it's a good idea to get these kinds of agreements in writing anyway, an agreement to rent or lease property for less than a year doesn't have to be in writing to be enforceable.

Henry wants to submit an offer for Lacy's house. Under the statute of frauds, which of the following is NOT a requirement Henry must meet for his offer to become an enforceable purchase agreement?

The contract must be notarized.

consideration

The giving of something of value, which can include the agreement to not do something. Consideration is a required element of a binding contract. Ex. Carly is a buyer and Wade is a seller. Carly gives Wade earnest money and a promise to purchase his property. This is her consideration. Wade's consideration to Carly is his agreement to sell his property. Ok

legal purpose

The idea that a contract must not propose to do anything illegal; such a contract would be unenforceable Ex. Because Mario wasn't actually the legal owner of the property that he'd swindled from another person, the contract to sell the property to Marissa lacked legal purpose and was unenforceable.

In a real estate transaction, which three of the following are examples of consideration?

The seller's promise to sell the property to the buyer The seller's commitment to transfer the property to the new owner The property itself

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

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

In the eyes of the law, why do people under age 18 lack contractual ability?

They're minors.

Legally, duress can mean any of the following:

Threats to physically harm someone, their family, or their property Threats of legal action, such as a lawsuit or criminal prosecution Threats of severe economic damage

A minor who enters into a contract with an adult to purchase real estate may hold the adult to the contract, but the adult can't legally hold the minor to the contract.

True

If a party doesn't have legal capacity and enters into a contract anyway, the contract is voidable by the party lacking the capacity.

True

If your client signs a contract while under duress, that contract is not valid.

True

In real estate transactions, the use of electronic transmission and signatures is supported by federal and state law.

True

One form of duress is a threat of significant economic harm.

True

The Washington Electronic Authentication Act provides details about the authentication of digital signatures.

True

Which two of these statements describe the essential element of offer and acceptance?

Two parties enter into an agreement with a full understanding of contract terms. A real estate broker offers to represent a client in a sales transaction. They discuss the terms of the agreement, and the client accepts.

The statute of frauds states that if a contract transferring ownership of real property is not in writing, it's ______.

Unenforceable

A contract for an illegal purpose is ______.

Void

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

Voidable

In a contract, the element of consent is also called _____.

Voluntary agreement

What does the parol evidence rule state?

In most cases, a written agreement is the final and comprehensive expression of the parties' agreement. It generally prohibits introducing oral or written evidence that contradicts that agreement.