example of an executory contract.

NC Real Estate Unit 9 - Basic Contract Law Flashcards executory contractsomething remains to be done by one or both parties.-A sales contract, signed by all parties, pending closing, is an example of an executory contract.offerorthe party making the offer, usually the buyer express contractthe parties state the terms and show their intentions in words to that effect. An express contract may be either oral or written.-The statute of frauds (discussed later) requires all contracts for the transfer of an interest in real estate to be in writing. Therefore, all real estate contracts should be

expressed written contracts.-EX: Hugh approaches his

neighbor, Bob, and says, "I will paint your house today for $500." Bob replies, "If you paint my house today, I will pay you $500." Hugh and Bob have entered into an express

oral contract.-EX: Betty writes, signs, and delivers an offer,

which Sam then signs. Betty and Sam have an express written contract as soon as Betty learns that Sam has signed Betty's offer.An absolute auction is one where the seller agrees to accept the high bid, no matter what the terms of the bid.TrueFalse True****An absolute auction, also known as an auction without reserve, is one where the seller agrees to accept the highest bid, no matter what its terms are.All of the following are essential to the validity of a purchase contract EXCEPTA)earnest money in good funds.B)communication of acceptance to the offeror.C)lawful objective.D)consideration in money, promises, or something of value.A)earnest money in good funds.-A binder or an earnest money de¬posit is merely an expression of good faith and is not required to create a valid contract.In which of the following situations has reality of consent been reached?A)Buyer's spouse threatened divorce if buyer did not buy property.B)Seller lied about her motivation for selling.C)Listing agent lied about completion dates of recreational amenities.D)Seller signed sales contract at gunpoint.B)Seller lied about her motivation for selling.****Contracts signed by a person under duress or undue influence are voidable by that person or by a court. Extreme care should be taken when one or more of the parties to a contract are elderly, sick, in great distress, or under the influence of alcohol or drugs, both legal and illegal.Substantial performanceOne party has substantially performed the contract but does not complete all the details exactly as the contract requires.-Such performance-for example, under construction contracts-may be sufficient to force payment, with certain adjustments for any damages suffered by the other party.A void contract is one that isA)not legally enforceable.B)rescindable by agreement.C)voidable by only one of the parties.D)not in writing.A)not legally enforceable.

While contracts are complicated, every valid contract has similar characteristics.A contract is what sort of agreement?A contract is a voluntary agreement. No one may be forced into a contract.** After the auctioneer accepts the offer, or bid, the buyer and the seller formalize their oral agreement with a written document to satisfyA)the attorney general.B)the real estate commissioner.C)the statute of frauds.D)the auction company.C)the statute of frauds.UnenforceableValid between the parties, but neither party may force

performance-EX: Certain oral agreements

According to the statute of frauds, a contract for the sale of real estate, a long-term option, and a four-year commercial leaseA)must be in writing to be legally binding.B)needs to be written and signed within appropriate time frames to be legal and enforceable.C)must be in writing to be enforceable.D)should be executed within a certain time or it will automatically expire.C)must be in writing to be enforceable.voidNo legal effect-It is unenforceable in a court of law because it does not meet the essential elements of a contract.However, a void contract may be fully executed unless one

of the parties disaffirms it.-EX: Contract for an illegal

purpose-EX: A seller enters into a purchase agreement

with a buyer who has been adjudicated incompetent by a court. The contract is void because both parties must be competent to create a valid contract.The typical real estate agent or broker rarely has the ability to accept an offer in place ofA)the brokerage.B)the bank.C)the title companyD)the seller.D)the seller.All of the following are essential elements of a contract EXCEPTA)rescission.B)mutual agreement.C)a lawful objective.D)consideration.A)rescission.-Rescission is a remedy for breach. The injured party may rescind the contract, which means the contract is declared invalid and both parties return to the position they were in before they entered into the contract.Rescission may be appropriate when facts were misrepresented or one party entered the contract under duress.breach of contracta violation, without legal excuse, of any of the terms or conditions of a contract, as when a seller breaches a sales contract by not delivering title to the buyer under the conditions stated in the agreement.-you are not an attorney, get one involved if buyer doesnt show up to closing In general, the four essentials of a valid contract are as

follows:

• Legally competent parties2. Mutual assent or deliberate

agreement3. Legality of object4. Consideration There are two types of real estate auctions. In one, the seller has the right to stop the bidding if it becomes

apparent that the high bid will be unacceptable, or too low, to the seller. This isA)an auction bait and switch.B)an auction in abstention.C)an auction with safe stop.D)an auction with reserve.D)an auction with reserve.

executed contractis one in which all parties have fulfilled their promises and therefore, fully performed the contract, such as a sales contract that has closed.-(Do not be confused by the fact that the word execute is also used to refer to the signing of a contract.) A buyer is under contract but would rather let her friend buy it. Unless the contract prohibits it, the friend can take over the buyer's obligation by the process known asA)subordination.B)assignment.C)substantial performance.D)mutual consent.B)assignment.ConsiderationCourts will not enforce gratuitous (free) promises.Consideration is something of legal value, bargained for and given in exchange for a promise or an act.-A binder or an earnest money deposit is merely an expression of good faith and is not required to create a valid contract.

validBinding and enforceable on both parties-EX: Agreement

complies with essentials of a valid contract A seller is under contract to convey ownership of a property to a buyer. The seller changes his mind, and the buyer sues for specific performance. What is the buyer seeking in the lawsuit?A)Conveyance of the propertyB)Money damagesC)Deficiency judgmentD)New contract A)Conveyance of the property-An injured party may file a court action, known as a suit for specific performance, to force the other party to perform the contract as agreed.Because every parcel of real estate is considered unique, a suit for specific performance brought by the buyer against the seller under a purchase and sales contract may be successful if the buyer can demonstrate that the property is unique and/or rare.Mutual assent or deliberate agreementAn offer by one party is accepted by the other party.In a unilateral contract, one party promises to induce a second party do something. The second party is not legally obligated to act.TrueFalse True A broker is permitted to fill in the blanks on certain approved preprinted documents (such as sales contracts and leases) when authorized to do so by the parties, provided the brokerA)has a lawyer present at the timeB)has the client fill in the blanks at the brokers' direction.C)charges a fee for filling out forms.D)does not charge a separate fee for completing the forms.D)does not charge a separate fee for completing the forms.specific performanceThe injured party may file a court action, known as a suit for specific performance, to force the other party to perform the contract as agreed. Specific performance is ordered only when the subject matter of the contract is not readily available from another source and when each party has the ability to perform the contractual obligations.compensatory damagesmoney intended to restore a plaintiff to the position he was in before the injury-Thus, in many jurisdictions (but not North Carolina), the buyer can be sued for compensatory