Addendum
Any provision added to an existing contract that may change or be an addition to the content of the original.
Assignment
Refers to the rights or duties under a contract. Substitution of parties (PEOPLE)
Amendment
A change or modification to the existing content of a contract.
Bilateral Contract
A contract that must have two promises.
Breach of Contract
A violation of any of the terms or conditions of a contract.
Consideration
Something of legal value offered by one party and accepted by another as an inducement to perform (or not perform) some act. It must be good & valuable between the parties.
Contingencies
Conditions that must be satisfied before a sales contract is fully enforceable.
Contract
A voluntary promise between two competent parties to perform (or not perform) some legal act in exchange for consideration.
Counteroffer
A new offer; it rejects the original offer. The original offer ceases to exist once this has been proposed.
Disclosure
These must be shared by law in order for consumers to make informed decisions.
Earnest Money
A purchaser provides this as evidence of the buyer's intention to carry out the terms of the contract in good faith. The amount is usually sufficient to discourage the buyer from defaulting, compensate the seller for taking the property off the market and
Enforceable Contract
A type of contract classification that meets all the elements of a valid contract, including compliance with any applicable STATUTE OF FRAUDS or other law that requires it to be in writing or signed by both parties.
Executed Contract
A contract in which all parties have fulfilled their promises.
Executory Contract
This type of contract exists when one or both parties still have an act to perform.
Express Contract
A contract where the parties state the terms and show their intentions in words, either oral or written. Most real estate contracts are this.
Implied Contract
A contract where the agreement of the parties is demonstrated by their acts and conduct.
Land Contract
A type of contract where the owner/seller (AKA vendor) retains legal title. The buyer (AKA vendee) takes possession and holds equitable title to the property. The buyer makes a deposit and pays regular monthly installments over a number of years. The buye
Liquidated Damages
To simplify matters in the event that one party breaches a contract, the parties may agree on a certain amount of money that will compensate the non-breaching party. This money is called:
Novation
Substitution of a new CONTRACT for an existing contract.
Offer and Acceptance
In a real estate transaction, this is when the sales contract sets out the offer by the buyer that is accepted by the seller.
Option
A type of contract by which an optionor (generally an owner) gives an optionee (a prospective purchaser or tenant) the right to buy or lease the owner's property at a fixed price within a certain period of time. This is enforceable by the optionee only an
Owner Financing
Where the seller provides credit for all or part of the funds that will allow the buyer to move forward with the transaction.
Purchase Money Mortgage
When the buyer receives title to the property immediately but places a security interest on the property in favor of the seller.
Rescission
Returns the parties to their original positions before the contract, so any monies or property exchanged must be returned (usually to remedy breach but sometimes by mutual agreement).
Statute of Frauds
State requirement that the contract be in writing.
Suit for Specific Performance
When the buyer asks the court to force the seller to go through with the sale and transfer the property as previously agreed.
Time is of the Essence
When each of the elements of the contract must be performed within the specified time (a party who fails to perform an obligation under the contract on time is liable for breach of contract.)
Unenforceable Contract
A type of contract classification where a contract may appear on the surface to be valid; however neither party can sue the other to force performance (i.e. oral agreement). Still "valid between the parties" but not enforceable in court (but can file suit
Unilateral Contract
A contract that has only one promise.
Valid Contract
A contract that meets all the essential elements that make it legally sufficient, or enforceable, and is binding in a court of law.
Voidable Contract
A type of contract that appears on the surface to be valid, but it may be rescinded or disaffirmed by one or both parties based on some legal principle. Can't be enforced in court. The person under duress/harmed makes the decision (when able)
Voluntary
No one may be forced
Offer & Acceptance; Consideration; Legal Purpose; Consent; Legal Capacity
Essential elements of a contract
Offeror
The person who makes an offer.
Offeree
The person to whom the offer is made.
Mutual Assent
Complete agreement between the parties about the purpose and terms of the contract.
Offer
A promise made by one party, requesting something in exchange for that promise.
Acceptance
A promise by the offeree to be bound by the EXACT terms proposed by the offeror.
A counteroffer is received; the offer has expired, the offer has been revoked; outright rejection of the offer
Reasons an offer can be terminated
Consent
A free and voluntary act; a prudent and knowledgeable decision without undue influence, misrepresentation, fraud, or duress.
Legal Purpose
The purpose of a contract must contain this element or it is not a valid contract.
Legally Competent Parties
All parties to a contract must be of legal age and have enough legal mental capacity to understand the nature or consequences of their actions.
Void Contract
This type of contract has no legal force or effect because it lacks some or all the essential elements of a contract. This type of contract was never a legal contract (i.e. forged name.)
Contract with a MINOR; if one has an OPTION TO DISAFFIRM and does not do so in the specified time period; entered into with a MENTALLY ILL person (during the time of the illness and a reasonable period after the person is cured); made UNDER DURESS; with M
Reasons a contract may be considered voidable:
Discharged
A contract is this when the agreement is terminated.
Performance; Breach, Rescission; Partial Performance; Substantial Performance; Impossibility of Performance; Mutual Agreement; Operation of Law; Novation; Statute of Limitations; Cancellation
Reasons a contract is discharged/terminated:
Valid as Between the Parties
Once the agreement is fully executed by the transfer of the deed and purchase price, satisfying both parties, neither has reason to initiate a lawsuit to force performance.
Statute of Limitations
Where a state limits the time during which parties to a contract may bring legal action, or lawsuit, to enforce their rights.
Partial Performance of the Terms, Along with Written Accceptance
A contract that is discharged by this when the parties agree that the work is performed close enough to completion they can agree that the contract is discharged even if some minor elements remain unperformed.
Substantial Performance
A contract that is discharged by this when one party has substantially performed the contract but does not complete all the details the contract requires.
Impossibility of Performance
A contract that is discharged by this when an unforeseen circumstance has made an act required by the contract impossible or impracticable.
Mutual Agreement
A contract that is discharged by this when both parties to the contract agree.
Operation of Law
A contract that is discharged by this when it is voided because of fraud, involvement of a minor, or altered without the written consent of all parties involved.
SALES PRICE and terms; adequate DESCRIPTION of the property and improvements; statement of the KIND and CONDITION of the TITLE and the FORM OF DEED to be delivered by the seller; the KIND of TITLE EVIDENCE required, WHO will provide it and HOW MANY DEFECT
In addition to the essential elements of a contract, a real estate sales contract will include:
Binder
An offer by a buyer presented in a shorter document instead of a complete sales contract (typically for commercial/industrial transactions). States the essential terms of the offer and acknowledges that the buyer's representative has received the buyer's
Equitable Title
An interest in land that is held by the buyer after both the buyer and the seller have executed a sales contract (the title is still with the seller until delivery & acceptance has occurred).
Uniform Vendor & Purchaser Risk Act
Adopted by some states, it specifically provides that the seller bear any loss that occurs before the title passes or the buyer takes possession.
ACTION necessary to satisfy the contingency; TIME FRAME within which the action must be performed; PARTY WHO IS RESPONSIBLE for paying any costs involved
A contract contingency clause will include the following three elements:
MORTGAGE Contingency; INSPECTION Contingency; PROPERTY SALE Contingency; LIENHOLDER APPROVAL
Most common types of contingencies
Mortgage Contingency
A type of contingency that protects the buyers earnest money in the event that the buyer is unable to secure a mortgage on the property.
Inspection Contingency
A type of contingency that provides that the buyer may obtain certain inspections of the property and may cancel the contract if the inspections indicate an unsatisfactory or unsafe property condition.
Termite; lead-based paint; structural or mechanical systems; sewage facilities; radon
Types of Inspections
Property Sale Contingency
A type of contingency that protects a buyer who has to sell a home in order to buy the seller's property.
Lienholder Approval
A type of contingency that requires this approval if it's a short sale.
Contract for Deed; Contract of Sale; Bond for Title; Installment Contract; Land Sales Contract; Articles of Agreement for Warranty Deed; Owner Financing; Rent to Own; Purchase Money Mortgage
Synonyms of Land Contract
Client representation agreements; sales contracts; options; escrow agreements; property management agreements; leases; owner financing agreements
Written agreements most often used by real estate professionals
Escrow or Trust Account
Earnest money deposits are typically held where?
Reality of Consent
I know what I am doing
Escrow
This is entered into when earnest money is deposited into the selling broker's account.