A contract in which both parties enter into mutual promises.
Bilateral Contract
Having the mental and age capacity to enter into a contract.
Competent
An agreement between two or more competent parties, supported by consideration, to do...or not do...a certain legal act.
Contract
Listing agreement whereby the seller may find a buyer without owing a commission, although the seller agrees not to list the property with any additional brokers
Exclusive Agency Listing
Listing agreement whereby the broker earns a commission no matter who procures the buyer
Exclusive Right of Sale
(most advantageous for the broker because the broker gets paid regardless of who finds the buyer. This type of listing agreement must be in writing and is considered to be a bilateral contract.)
A specific dollar amount of damages to be paid by a breaching party as specified in the contract
Liquidated Damages
An agreement and understanding between the parties concerning the intent of their contractual terms
Meeting of the Minds
A listing agreement whereby the broker keeps any funds over a definite net amount to be received by the seller
Net Listing
The net listing should be avoided (it is illegal in many states) because it frequently results in dissatisfied sellers and brokers and could create a conflict of interest.
Substitution of a contract and a party for another contract and another party
Novation
(Under a novation, the original party to the contract is released from liability.)
Listing agreement whereby the seller promises to pay a broker a commission if that broker procures a buyer. The seller may sell the property itself without owing a commission, and the seller may enter an open listing with several different brokers simulta
Open Listing
(The seller may sell the property itself without owing a commission, and the seller may enter an open listing with several different brokers simultaneously.) Least desireable
In an ______ contract, the Optionor (seller) grants an Optionee (buyer) the right to buy the subject property within a specified period of time for a specified price and other terms.
Option
(An option contract must be in writing. During the option period, the Optionor agrees not to sell the property to anyone else. The Optionee is under no obligation to purchase. The parties can agree whether the consideration is refundable in full, i
Body of law that states that certain types of contracts must be in writing to be enforceable
Statute of Frauds
Examples:
-Sale and Purchase Contracts
-Option Contracts
-Leases for more than one year
Establishes time limits for filing litigation
Statute of Limitations
Status of a contract when it violates the Statute of Frauds
Unenforceable
A contract whereby only one party undertakes a promise or obligation
Unilateral Contract
(For example, in an option contract the Seller makes the promise to sell upon terms and conditions stated in the option. The Buyer has made no promise and is under no obligation to buy.)
When a contract satisfies all legal requirements
Valid
A contract the law will not recognize under any circumstances
Void
(For example, if the subject matter of the contract is illegal, such contracting to purchase illegal drugs, the agreement is void under the law. Also, a legal contract that has terminated or expired properly is also considered to be void.)
Contract involving a minor or other incompetent party wherein the incompetent part has a choice to enforce or rescind the contract
Voidable
(In Florida, a person under 18 years of age is considered to be incompetent. The law states that the incompetent party may choose to enforce the contract, or they may choose to have the contract declared void. The competent party has no choice an
Real estate licensees are permitted to prepare three types of contracts:
-Sale and Purchase Contract: The contract between a buyer and a seller of real property
-Listing Agreement: An employment agreement between a broker and a seller (principal) to perform a real estate service
-Option Contract: A contract in which a potentia
In a Sale and Purchase Contract, if the Buyer has paid part of the purchase price to the Seller, and has either (1) taken possession of the premises, or (2) commenced repairs or improvements, then the Statute of Frauds requirement does not apply.
Partial Performance Doctrine
In a Sale and Purchase Contract, if the parties go to closing, the purchase price is paid and title is conveyed to the Buyer, then the Statute of Frauds does not apply and cannot be raised as a defense after the sale.
Full Performance Doctrine
STATUTE OF LIMITATIONS
Every potential legal action to enforce a contract must be filed before the time deadline expires. The time period for filing legal action to enforce contractual rights vary depending if the subject contract is written or oral. If the contract is written,
A contract that has not met the requirements of the statute of frauds or has gone beyond the legal time limit provided by the statue of limitations.
Unenforceable Contract
Four Essential Elements of a Contract:
-Contractual capacity of the parties
-Offer and Acceptance
-Legality of Object
-Consideration
Every contract must have a mutual agreement (meeting of the minds) between the parties. This mutual agreement is demonstrated through the presentation of an offer, the acceptance of the offer, and communication of the acceptance to the party presenting th
Offer and Acceptance
The contract must have a legal subject matter. If the subject matter is illegal, no valid contract exists
Legality of Object
The "force" that encourages the parties to perform the terms of their agreement. It may be either valuable consideration (money or even a promise) or "good" consideration (love and affection).
Consideration
In order for a real estate contract to be _____, it should be in writing and signed by the parties.
Enforceable
(It does not need to be notarized or witnessed.)
Every real estate contract must contain some type of _____________.
Consideration
(earnest money deposit at time of contract or a promise.)
_______ title to real property exists when a party owns real estate. _____ title exists when a party has an interest in real estate that is less than outright ownership.
Actual (legal);
Equitable
(For example, when a Buyer contracts to purchase property, the Seller has legal title and the Buyer has equitable title.)
An _______contract exists when all of the details are understood by the parties, whether oral or in writing.
Expressed
An ______contract exists when some of the terms and conditions are not stated but rather are inferred by the nature of the transaction or the conduct of the parties.
Implied
(For example, if a "For Sale By Owner" knowingly accepts the services of a real estate licensee and the licensee is the procuring cause of the sale, a real estate commission would probably be due the licensee, even though an actual expressed listi
Anytime there is something remaining to be done under a contract, its status is considered to be
executory
(For example, a duly signed Sale and Purchase Contract is executory because the closing has not yet occurred.)
An _______ contract is one in which all the terms and conditions agreed upon have been completed.
executed
(For example, after a real estate closing is completed, the Sale and Purchase Contract has been executed.)
A _____ contract is one that is in writing and under seal (under seal does not mean notarized).
Formal
(However, the presence or absence of a seal has no effect on the legality of a contract.)
An ______ contract is a contract that does not meet all the requirements of a formal contract (oral or not under seal).
Informal
An oral contract is also known as a _____ contract.
parol
The ______ is the party making the offer. The ______ is the party that considers the offer.
offeror;
offeree
In order to create a contract, the following sequence of events must transpire:
1. Offer
2. Acceptance
3. Communication of the acceptance to the offeror
(If the acceptance is not communicated to the offeror (or its agent), then technically under the law a contract has not been formed.
Contract Negotiation Example:
Broker Dave lists an office building for First Mutual Bank. An offer was presented that was $20,000 less than the asking price. Broker Dave presented the offer to the Bank at 4:00 p.m. on Monday. The Bank accepted the offer within an hour and notified the
Terminating an Offer:
1) Acceptance
2) Withdrawal
3) Rejection
4) Counteroffer
5) Lapse of time
6) Destruction of the Subject Property (e.g. fire)
7) Death or Insanity
TERMINATION OF CONTRACTS
1. Performance
2. Mutual Rescission
3. Destruction of the Subject Property
4. Breach
If both parties agree, they can elect between themselves to terminate (cancel) their contract. In real estate, there may still be outstanding issues concerning whether a real estate licensee is entitled to compensation.
Mutual Rescission
If one of the parties fails to satisfy its contractual obligations, the non-breaching party may terminate the contract and commence legal proceedings.
Breach
Remedies for Breach:
Liquidated Damages
Specific Performance
Unliquidated Damages
Rescission
Declaratory Judgment
When a contract specifies a fixed dollar amount that may be claimed by a non-breaching party, the fixed dollar amount is known as ____ _____
Liquidated Damages
(If the buyer breaches a contract, typically the seller claims the earnest money deposit as liquidated damages.)
If a party does not want money damages, they have the option to seek _____ _____through judicial proceedings. A judge can order a party to perform in accordance with the contract terms.
Specific Performance
(A non-breaching party typically has a choice of either accepting liquidated damages (earnest money deposit) or specific performance, but may not choose both.)
Compensatory money damages that cannot be determined from the contract, but rather are determined by a court after presenting evidence in court.
Non-liquidated Damages
A non-breaching party may be entitled to ______ of the contract by having a court of law cancel the contract.
Rescission
(Typically under rescission, the non-breaching party is entitled to a return of any monies paid under the contract.)
If either of the parties is unsure about their rights and obligations, they may ask a judge to clarify or interpret the contract through the judicial process of construction. Once the legal determination has been made, the court will issue a ______ _____
declaratory judgment
Assignment of Contracts
The party transferring their rights is called the ASSIGNOR.
The party receiving the contractual rights is called the ASSIGNEE.
(Be aware that because a party has assigned a contract to someone else, that fact does not relieve the assignor of legal respons
Authority to Prepare Contracts
Licensees are specifically authorized to prepare:
Sales and Purchase Contracts
listing agreements
option contracts
certain pre-approved residential lease forms.
The contract between a seller of real property and the broker:
Listing Agreement
(A sales associate cannot directly enter into a listing agreement with a potential seller, but the sales associate may sign the listing agreement on behalf of the broker.)
A well-drafted listing agreement will include:
-names of the parties
-expiration date
-seller's disclosure of known property defects
-legal description
-amount of the commission
-listing price of the property
-any other conditions agreed upon by the seller
-the conditions which establish when a commis
A copy of the listing contract must be furnished to the principal within _______ after the written agreement is obtained.
24 hours
In this type of listing agreement, the commission is earned when the licensee finds a purchaser that is ready, willing, and able at a price and terms acceptable to the seller.
find a purchaser
In this type of listing agreement, the commission is earned only if the prospective buyer actually closes on the property.
effect a sale
In this type of listing agreement, the broker has performed even if the seller rejects the offer.
price and terms contract
A computerized, data bank system that allows brokers to cooperate and share listing information.
Multiple Listing Service
(Sellers sign only one type of listing agreement, even though their property may be advertised in the MLS system. Typically, open listings are prohibited from participating in the MLS system.)
Buyer-Broker Agreement:
It is possible for a buyer to enter into an agreement with a broker providing for the exclusive representation of that buyer. Although commissions are typically paid by the seller's broker, the buyer guarantees that the Buyer-Broker agent will be paid if
A licensee is considered to be the _____ _____ of the sale when they have set into motion events that were ultimately responsible for the formation of a contract.
procuring cause
(meaning the broker obtaining the signed contract)
Soliciting Listings
Under Florida law, if a person does not wish to receive telephone solicitations of any kind, they can register their name with the Florida Department of Agriculture, Division of Consumer Services, and have their name placed on the "no solicitation" list.
Licensees may telephone their prior clients (that they have conducted business with during the last ____ months) for solicitation purposes, even if those prior clients are on the "no solicitation" list.
18
In a real estate Sale and Purchase Contract, the seller retains legal title and the buyer has _____ title while the contract is executory.
equitable
Equitable title is a beneficial interest in real estate that implies legal title at a later date.
A ______ ______ _____ contract is an agreement by a seller (vendor) to sell specific real property to a buyer (vendee).
real estate sales
In order to be enforceable, real estate sales contracts must be in writing.
In order for a real estate sales contract to be valid there must be:
-two or more parties
-consideration
-accurate identification of the property (legal description)
-lawful subject matter.
Although an ____ _____ _______ is not required to make a contract valid, is shows good faith by the buyer and protects the seller in the event of default.
earnest money deposit
All well-drafted real estate Sale and Purchase Contracts will include:
A. Date, time and place of closing
B. Purchase price
C. Financing terms
D. Quality of title to be conveyed (unless otherwise specified, a fee simple estate is expected)
E. Type of deed (unless otherwise specified, a general warranty deed is expected)
F. I
REQUIRED DISCLOSURES
Under certain state and federal laws, various disclosures must be given to prospective buyers:
A. Radon Gas Disclosure
B. Lead Based Paint (if property was built before 1978)
C. Energy Efficiency Disclosure
D. Homeowner Association Disclosure
E. Flood Insurance Disclosure
F. Condominium and Cooperative Disclosures
G. Stigmatized Property:
Failure to timely provide the homeowner's association disclosure will give the buyer a ________ right of rescission that will begin once the disclosure is provided.
3 business day
Florida Law does NOT require real estate licensees to disclose the claim that a property may be _________. The site of a homicide, suicide or death is not a material fact that must be disclosed in a transaction.
stigmatized
An ______ ______ Contract, also known as a Land Contract or Contract for Deed, is considered a financing device. The buyer takes possession of the property, makes installment payments, and when the final payment is made, the deed is delivered to the buyer
Installment Sale
(If there is a breach by the buyer, and the Contract for Deed has been recorded, the seller must file a foreclosure action. Licensees should exercise great caution when involved with an Installment Sale Contract and should advise their cl
Sellers of real estate are required to disclose all known _____ ______ that are not openly visible to potential buyers as soon as possible.
property defects
If a licensee is aware of any material defects of a property, those defects must be disclosed as soon as possible, but in any event no later than the parties entering a Purchase and Sale Agreement.
(Florida Supreme Court decision of Johns
An _______ contract must be in writing, must provide definite consideration, and is unilateral in nature. All terms and conditions must be specified.
option
A __________ can be either:
-formal (written) or parol (oral)
-unilateral or bilateral
-implied or express
-executory or executed
contract