Real Estate Contracts Chapter 12 _ Prin. of R.E. Flashcards

Real Estate Contracts ) Chapter 12 _ Prin. of R.E. Flashcards A committee that drafts and revises standard contract forms to be used by real estate licensees.unenforceable contract An agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertake to do or refrain from doing some legal act or acts. A contract may be either unilateral, where only one party is bound to act, or bilateral, where all parties to the instrument are legally bound to act as prescribed.breach "time is of the essence."This means that the contract must be performed within the time limit specified and that any party who has not performed on time is liable for breach of contract.Of the promulgated contract forms required for use by licensees,

only five state that "time is of the essence":1. the

"Termination Option" paragraph (paragraph 23) of the sales contracts,2. the "Addendum for Sale of Other Property by Buyer,"3. the "Third Party Financing Addendum for Credit Approval,"4. the "Addendum for 'Back-Up' Con- tract," and5. the "Short Sale Addendum." A contract in which all parties have fulfilled their promises; a contract is executed upon closing and funding.executory contract A contract under which the agreement of the parties is demonstrated by their acts and conduct.legality of object A contract for the sale of real estate wherein the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until final payment. Also called an installment contract, land contract, or contract of sale.Real estate licensees should not use the promulgated contract forms to create a contract for deed or lease purchase agreement.Doing so is considered an unauthorized practice of law and can be cause for disciplinary action to revoke a salesperson or broker license under the License Act.counteroffer A contract under which something remains to be done by one or more of the parties.express contract That law pertaining to the period of time within which certain actions must be brought to court.Texas Real Estate Broker Lawyer Committee Substituting a new obligation for an old one or substituting new parties to an existing obligation. For example, a lender's modifying note terms for a buyer who fell behind on payments.offer and acceptnce

Distinguish between bilateral and unilateral contractsbilateral - both parties promise to do something; courts today interpret most real estate contracts to be bilateral - an exchange of promisesunilateral - one party makes a promise to induce a second party to do something An amount predetermined by the parties to an agreement as the total amount of compensation an injured party should receive if the other party breaches a contract; usually the earnest money in a residential sales transaction.In the event that the defaulting party wrongfully fails or refuses to sign a release to permit the title company to disburse the earnest money to the damaged party, the defaulting party will be liable to the other party for liquidated damages in an amount equal to the sum of (1) three times the amount of the earnest money, (2) the earnest money, (3) reasonable attorney's fees, and (4) all costs of suit.novation An oral or a written contract in which the parties state the contract's terms and express their intentions in words.implied contract Discuss the provisions of the Texas promulgated contract, a broker's avoiding the unauthorized practice of law, and the computation of time agreement in writing and signed Describe the differences between promulgated and approved forms and the requirements for their use A licensee may use a form that has been "approved" by the commission. Once a contract form or addendum has been "promulgated" by the commission, though, it must be used by a licensee for that particular contract situationFour

Exceptions: Transactions in which the licensee is

functioning solely as a principal, not as an agent Transactions in which an agency of the U.S. government requires a different form to be used Transactions for which a contract form has been prepared by the property owner or prepared by an attorney and required by the property owner Transactions for which no standard contract form has been promulgated by the Texas Real Estate Commission, and the licensee uses a form prepared by an attorney-at-law licensed by this state and approved by the attorney for the particular kind of transactions involved or prepared by the Texas Real Estate Broker-Lawyer Committee and made available for trial use by licensees with the consent of the commission People who are recognized by law as being able to contract with others; usually those of legal age and sound mind consideration A new offer made as a reply to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror's repeating it.earnest money deposit

Explain how contracts may be discharged and the remedies available to a non-defaulting party

Discharge of Contract: Partial performance of the terms

along with a written acceptance by the person for whom acts have not been done or to whom money has not been paid Substantial performance, in which one 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 damages suffered by the other party.Impossibility of performance, in which an act required by the contract cannot be accomplished legally Mutual agreement of the parties to cancel Operation of law, as in the voiding of a contract by a minor, or as a result of fraud or the expiration of the statute of limitations or as a result of a con- tract's being altered without the written consent of all parties involvedthe non-defaulting party may sue for specific performance to force the defaulting party to carry out the terms of the contract and/or seek such other relief as may be provided by law (such as, submit to arbitration or mediation, seek an injunction, or sue for compensatory damages); or terminate the contract and receive the earnest money, releasing both parties from the contract The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another's name.escrow The right to purchase property within a definite time at a specified price. There is no obligation to purchase, but the seller is obligated to sell if the option holder exercises the right to purchase.specific performance The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered on the performance of certain conditions outlined in the escrow agreement.In Texas, a title company typically acts as the escrow agent, with the provisions of the promulgated sales contract establishing the escrow agreement in residential transactions escrow agreement A one-sided contract wherein one party makes a promise in order to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.valid contract Something of value that induces a person to enter into a contract. Consideration may be "valuable" (money) or "good" (love and affection).contract for deed

An essential component of a valid contract; a contract must be for a legal purpose and in compliance with public policy.liquidated damages Violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due competent parties The transfer in writing of interest in a contract, mortgage, lease, or other instrument.

contract: unilateral contract; bilateral contract

A contract, used when a transaction is closed through an escrow, that sets forth the duties of the escrow agent as well as the requirements and obligations of the parties to the transaction.An escrow agreement requires that the seller deposit with the escrow agent the deed and other pertinent documents, such as leases, a survey, and a mortgage pay- off letter (if the existing loan is to be paid in full and released of record). It also provides for the buyer to deposit the purchase price and an executed deed of trust and note if he is securing borrowed funds to purchase the property.executed contract Uniform Electronic Transactions Act (UETA) and the Uniform Real Property Electronic Recording Act of 2005 permit electronic records and electronic signatures in electronic transactions to be legally enforceable, so long as both parties to a transaction agree to conduct the transaction electronically The Texas statute of frauds requires that contracts for the sale of real estate and leases for more than one year be in writing to be enforceable. The statute provides the following requirements to prevent fraudulent proof of a fictitious oral

contract:- the signature of the party to be charged is

required;- a spouse's signature must be included when necessary to release marital rights, such as community property and homestead rights;- an agent may sign for a principal if the agent has proper written authority, such as a power of attorney; and- when sellers are co-owners, all co-owners must sign assignment Two essential components of a valid contract; a "meeting of the minds." option A legal action brought to compel a party to carry out the terms of a contract.statute of limitations A contract that complies with all the essentials of a contract and is binding and enforceable to all parties to it.void contract Identify the requirements for a valid contract and the statute of limitations for contract enforcement

Five Essential Elements:1. Competent Parties2. Offer and

Acceptance3. Consideration4. Legality of Object5.Agreement in writing and signeda real estate sales contract must contain an accurate legal description of the property being conveyed.Under Texas law, any action for the specific performance of a contract for the conveyance of