Real Estate Contracts Part 1

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contract

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a voluntary agreement between legally competent parties to perform or refrain from performing some legal act, supported by legal consideration. In essence, a _________ is an enforceable promise that must be performed and for which, if a breach of promise occurs, the law provides a remedy

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express contract

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the parties state the terms and show their intentions in words. may be oral or written.

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implied contract

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the agreement of the parties is demonstrated by their acts and conduct

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bilateral contract

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both parties promise to do something; one promise is given in exchange for another. A real estate sales contract is a __________contract because the seller promises to sell a parcel of real estate and deliver title to the property to the buyer, who promises to pay a certain sum of money for the property

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unilateral contract

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a one-sided agreement whereby one party makes a promise in order to induce a second party to do something. The second party is not legally obligated to act; however, if the second party does comply, the first party is obligated to keep the promise. An offer of a reward is an example of a ___________ contract. For example, if a person runs a newspaper ad offering a reward for the return of a lost pet, that person is promising to pay if the act of returning the pet is fulfilled

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executory

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when something remains to be done by one or both parties; that is, the agreement is partially performed. When a real estate sales contract is negotiated and signed by both parties

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executed

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When all parties have fulfilled all promises in the agreement.Once closing and funding have occurred, the real estate sales contract -the purchase price is paid, the deed is delivered, and the purchaser has possession of the property

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valid contract

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complies with all the essential elements and is binding and enforceable on both parties

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void contract

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has no legal force or effect because it does not meet the essential elements of a contract. For example, one essential condition for a contract to be valid is that it be for a legal purpose. Thus, a "contract" to commit a crime is void; it is not a contract at all

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voidable contract

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seems on the surface to be valid but may be rescinded, or disaffirmed, by the party who might be injured if the contract were to be enforced (in some cases this might be both parties). For example, a contract entered into with a minor or one in which fraud can be proven is usually voidable. A minor generally is permitted to disaffirm a real estate contract at any time while he or she is underage (a minor) or within a reasonable time after reaching legal age. A voidable contract will be considered by the courts to be a valid contract if the party who has the option to disaffirm the agreement does not do so within a prescribed period of time

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unenforceable contract

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has all of the elements of a valid contract; however, neither party can sue the other to force performance. For example, an oral listing agreement is unenforceable. A broker who takes an oral listing risks being unable to sue a seller if the broker sells the seller's property but is not paid a commission as promised. Unenforceable contracts are said to be "valid as between the parties," because after the agreement is fully executed or performed and both parties are satisfied, neither would have reason to initiate a lawsuit to force performance.

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competent parties

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The buyer and the seller must be of legal age and free from a mental handicap that would make them incompetent. In Texas, people are considered to be of legal age if they are at least 18 years old, or are married, or have had their minority status removed by a court. Contracts with the mentally infirm can be either void or voidable; they are void if the person has been adjudicated to be incompetent. To make a valid contract, a fiduciary, corporate officer, or agent must have legal authority given by a written document

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offer and acceptance

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This requirement, also called mutual assent, means that a "meeting of the minds" must occur. Offer and acceptance are technical legal terms. Courts look to the objective intent of the parties to determine whether they meant to enter into a binding agreement. The agreement terms must be fairly definite and understood by both parties. requires that a contract must be entered into as the free and voluntary act of each party. Contracts signed by a person under duress (use of force), menace (threat of violence), or undue influence or as a result of misrepresentation or fraud are voidable (may be canceled) by the injured party or by a court. Extreme care should be taken when one or more of the parties to a contract is elderly, sick, in great distress, or under the influence of drugs or alcohol.

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consideration

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an act or a promise that is offered by one party to induce another to enter into a contract; it is that which is given in exchange for something from another. Even though the sales price is stated in the contract to purchase real property and earnest money is received, the actual consideration that supports the contract is the mutual exchange of promises by buyer and seller to legally obligate themselves to do something they were not legally required to do before; that is, the seller agrees to sell a property for a certain price, and the buyer agrees to pay that price to buy the described property

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legality of object

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To be valid, a contract must not contemplate a purpose that is illegal or against public policy

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agreement in writing and signed

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The Texas Statute of Frauds requires that certain types of contracts 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.
A written agreement establishes the interest of the purchaser and his or her right to enforce that interest by court action. Thus, it prevents the seller from selling the property to another person who might offer a higher price. The signed contractual agreement also obligates the buyer to complete the transaction according to the terms agreed on in the contract

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uniform electronic transactions act

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permits electronic records and electronic signatures in electronic transactions to be legally enforceable. If a law requires a record to be in writing and all parties to the transaction have previously agreed to conduct transactions by electronic means, an electronic record satisfies the law. If the law requires a signature, an electronic signature satisfies the law. An electronic signature is an electronic sound, symbol, or process attached to a record and executed or adopted by a person with the intent to sign the record. An electronic record is received when (1) it enters an information processing system that the recipient has designated and (2) it is in a form capable of being processed by that system.

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parol evidence

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prevents the admission into court of any prior or simultaneous oral or written agreements that contradict the terms of the written contract. If, for example, the buyer and seller orally agree that the seller will pay the appraisal fee but the final contract states that the buyer will pay, then the written contract prevails

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assighnment

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refers to a transfer of rights and/or duties under a contract. Generally rights and obligations may be assigned to a third party unless the agreement forbids such an assignment or unless the agreement contains a personal obligation. Duties may be delegated but the original obligor remains secondarily liable for them (after the new obligor), unless he or she is specifically released from this responsibility. The purchase of a home on assumption or subject to an existing loan is an assignment. A contract that requires some personal quality or unique ability of one of the parties may not be assigned. Examples of such a contract are an owner-financed sale, which may not be assigned without express permission from the seller, and a listing agreement, which is a personal service contract. Most contracts include a clause that either permits or forbids assignment

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breach of contract

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a violation of any of the terms or conditions of a contract without legal excuse, as when a seller breaches a sales contract by not delivering title to the buyer under the conditions stated in the agreement. If either party breaches, or defaults, the defaulting party assumes certain burdens and the nondefaulting party has certain rights

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statute of limitations

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That law pertaining to the period of time within which certain actions must be brought to court