National Real Estate Exam - Contracts Flashcards

National Real Estate Exam - Contracts Flashcards Gift Promisesenenforceable because they contain no consideratoin Listing Agreements: Exclusive Listingagreement between a seller and a single broker which provides the listing broker certain rights to a commission from the sale of the listed property for a limited time Breach of Contracts: Specific Performance Court ordered remedy that forces the breaching party to perform Breach of Contracts: Liquidated DamagesDamages specifically agreed to by contracting parties in the event of a breach Basic Contract ElementsAll of the following must exist to create a contract offer/acceptance, consideration, and a lack of any defenses that would otherwise cancel a contract or prevent it from being formed.Basic Contract Defense: Duresscontracts where one is coerced into entering by physical or threatening behavior cannot be enforced.Basic Contract Defense: Fraud in the Factum Intentional deceit that causes one to execute a document other than the document he intended to execute Breach of ContractsCircumstance where a party fails to perform as agreed in a contract without any recognized legal excuse. The non-breaching party may be entitled to an award of damages Contract Enforcement: Death of patiesthe death or insanity of either party prior to acceptance will terminate an offer, personal service contracts are terminated by death Basic Contract Elements of the Offer: Death or InsanityThe death or insanity of either party prior to acceptance will terminate an offer.Performance Obligations: Private Restrictions Land use controls imposed by private individuals.Basic Contract Elements: Lapse of TimeSome offers terminate automatically if they are not accepted by a deadline established by the parties.Contract Enforcement: Statute of Limitations state laws that establish time limits on one's ability to bring a legal action, including an action to enforce a contract.Contract LawLegally enforceable agreement between competent parties who agree to perform, or refrain from performing specified acts.Methods of Formation: UnilateralContract where a single party promises to perform under

specified conditions. For example: $50 reward for lost dog.

Methods of Formation: OralContract arising from spoken promises contracts do not always need to be made in writing if the basic element of contract formation can be made orally. They are more difficult to prove and contracts longer than one year must be written.

Basic Contract Elements: Defenses/Minors The minor must reject a contract within a reasonable amount of time before becoming an adult or it will be binding. Minors my contract for certain necessities

Basic Contract Defense: Misrepresentation (False

Pretense) false statement or a concealment of a material fact that is unintentionally asserted, may be innocent or unintentional but still could render a contract void Basic Contract Elements: Defenses/Intoxication if established, says one lacks the ability to contract

Buyer-Broker Agreements:buyer agency agreement or buyer agency employment

contract is an agency relationship between a broker and a buyer, often including a salesperson working under the broker as a sub agent. This is formal representation vs. the informal assistance that a seller's agent may provide to a buyer w/o creating an agency relationship. Most states require proper disclosure to be made to buyer Buyer-Broker Agreements: Open Buyer Agreemnt Like an open listing, relationship between buyer and broker which permits any number of agents to be compensated depending on who brings a suitable property to the buyer's attention

Listing Agreements:Agency (special) between a broker/principal (not a

salesperson) and a seller/client. Listing agreements (agency employment contract) often authorize the Broker/principal to use sub-agents (salespersons) to complete the agency objectives (sell property). Common

listing agreements include: open, exclusive and net.

Basic Contract Elements: ConsiderationExist where parties bargain with one another to exchange promises. Consideration is what both parties agree to do or not do.Listing Agreements: Exclusive AgencyA listing agreement where the seller agrees to pay the exclusive agent a commission if he or she sell the property, and if any other broker sells the property as well.Listing Agreements: Exclusive Right to Sell Seller agrees to list the property with a single broker and agrees to pay them a commission regardless of who sells the property. This agreement must be in writing.Purchase AgreementBilateral and executory contact (sales contact) that specifies the terms and conditions of sale between a buyer and a seller or real estate Basic Contract Elements: Defenses/FraudContract defense which consists of any form of deceit by which one party intentionally attempt to gain an unfair advantage over another. They key to determining is whether or not it was intentional, it it was not intentional, it is not fraud, but may be misrepresentation.Basic Contract Elements of the Offer: Withdrawal An offeror may withdraw his offer at any time prior to its acceptance by the offeree, unless, for example, the offer is contained in a valid option contract.

Listing Agreements: Compensatoinagents generally earn payment upon one of two events:1) produces a ready, willing, and able buyers2) agent is the procuring cause of sale or purchaes Performance Obligations: PerformanceOnce a contract arises (offer, acceptance, consideration, lack of defenses) which may be an express or implied, unilateral or bilateral the obligation to do (perform) what was agreed upon may be controlled by additional factors.Listing Agreements: Terminating Listing Agreementsmay terminate upon the following:1) abandonment by the broker2) breach3) laps of time4) mutual agreement5) revocation6) death, insanity or bankruptcy7) change in ownership of subject property8) destruction of subject property Basic Contract Elements of the Offer: Rejection The offeree terminates an offer by rejecting it or making a counteroffer Basic Contract Elements: Defenses/Incompetency some people are legally unable to contract because they

lack capacity, for example: minors and intoxicated people

Listing Agreements: ExpiratoinState laws may require a specific termination date or impose a reasonable period of time if unstated in the agreement Contract Clauses: Survival/MergerUnder the law in many states, the promises and obligations in the contact are "merged" into the deed and do not survive settlement.Basic Contract Defense: MistakeArises from an error or a misunderstanding about the terms of conditions of an agreement. Contracts are voidable if based on a mutual, unintentional, material mistake.Property Management Agreementstypically a general agency relationship with the property owner Methods of Formation: BilateralContract where both parties make promises of performance Breach of Contracts Monetary DamagesRemedy for breach of contract that is limited to an amount the parties agree to (liquidated damages) Performance Obligations: NovationSituation where contracting parties agree to substitute one agreement in part or in full for another agreement. Through novation, the old agreement terminates and is replaced by the new agreement.Methods of Formation: Executory/Executed Contracts are executory when parties reach an agreement, but have yet to perform. Contracts are executed when they have been fulfilled.Methods of Formation: Express or Implied Terms and conditions may be either expressly stated, written or implicit from the nature of the contract or service

Basic Contract Defense: Illegalitycontracts that break a law cannot be enforced

Basic Contract Defense: Estoppel Certificate Document, aka as certificate of no defense or estoppel letter, which clarifies the amount of debt owed by one party to another, and/or the legal status between parties as of a specified date. Lenders use estoppel certificates to establish the mortgage amount owed as of a certain date.

Performance Obligations: TimingWhen no time is specified, the law will imply a reasonable time to perform. When a contract states that "time is of the essence" specified times are strictly enforced.Contract Enforcement: Statute of Fraudsstate laws based on common law, which require that

certain contracts be in writing in order to be enforceable:1)

sale of land2) long-term leases3 short-term lease - is an exception if less than 1 year, it may be oral Basic Contract Elements: Defenses/Legal Insanity One who has been ruled by a court to be incompetent or insane may not contract Basic Contract Defense: EstoppelPromissory Estoppel - legal doctrine that stops, or prevents, a person from canceling a contract, despite certain deficiencies. Estoppel relies on the judicial interpretation of fairness and is difficult to predict if a court will apply. Justifiable "reliance" is a necessary element in an estoppel defense.Basic Contract Elements of the Offer: Offer Promise from one party to enter into a binding agreement with another party, suject to specified terms or conditions.Contract Clauses: NoticeActual notice means that an individual received information or documents (public records). Constructive (legal) notice means that it is the public's responsibility to examine public records. Inquiry notice occurs when factors exist that would make a reasonable person inquire further.Listing Agreements: Net Listingsagreement where the seller pays the broker the difference between some set amount of money and agreed upon price Methods of Formation: ConditionsContracts may contain various conditions, or contingencies.Contract Clauses: Assignmenttransfer of the contractual right, title, or interest of one person (assignor) to another (assignee)

Basic Contract Elements: CounterofferA new offer by the offeree

Basic Contract Elements: AcceptanceAct of declaring a desire to create a contract consistent

with a specific offer. Offers may be accepted:1) Oraly2)

Written3) Mailed - when acceptance is sent by mail, the law staes that it is accepted once placed in the mailbox Types of Listing Agreement: Open Listing Agency agreement between a seller and any number of brokers, wherein the seller promises to compensate the broker if the broker sells the property. The owner is only obligated to the broker if they sell the property or were a procuring cause of the sale. The open siting is unilateral (obligates only the broker) and executory (will not arise unless/until broker produces a buyer Basic Contract Elements: DefensesA material defect which if proven either prevents a contract from forming or renders an otherwise valid contract unenforceable Buyer-Broker Agreements: Exclusive Buyer AgreementsTwo types:1) Exclusive Agency Buyer Agency Agreement - the buyer is only obligated to compensate the agent if the