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25 Cards in this Set
- Front
- Back
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Statute of frauds |
Purpose – to prevent perjury Application to contracts - certain contracts are affected
- Agreements for the sale of real estate must be written - Lease agreements that can't be performed within one year must be written
Legal versus enforceable – Oral is legal, written is enforceable in court
Consequence of noncompliance – oral contracts are enforceable if they fall under the statute of frauds, only enforceable if less than a year |
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The written instrument |
Contracts can reference more than one document – cross-referenced
Must be signed by the "party to be charged" - buyer and seller
Loss or distruction of memo will not nullify agreement if copies exist
Exceptions for pre-performance or sometimes made – if the seller does something based on the idea they have an oral contract this can be heard in court,
...For example cutting down trees in anticipation of selling a lot to someone who wants all trees cut down |
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Types and characteristics of contracts |
1. Express - agreement stated, nothing signed just stated 2. Implied - agreements indicated by acts of the parties, not signed or explicitly stated just assumed 3. Bilateral – promise exchanged for a promise, both parties have promised 4. Unilateral – promise exchange for act, one party promised based on actions of another, for example insurance company promises protection based on money received 5. Executed – everything completed = bought and sold 6. Executory - not completed, and process of completion before closing table 7. Valid – meets all requirements of a contract 8. Void - does not meet all requirements of a contract 9. Voidable – valid on its face but may be avoided, with minor voidable by minor, under duress or fraud voidable by injured party, mutual mistake voidable by either party 10. Unenforceable - oral contract unenforceable under statue of frauds, contract expired by "Time is of the essence", contract expired by statute of limitations |
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4 essential elements/requirements of a valid contract |
1. Mutual assent – offer and acceptance, two parties agreeing 2. Legal consideration 3. Competent parties 4. Legal purpose |
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Mutual assent |
The valid offer must be intentional, specific, and communicated to the offeree.
(Offer must be specific as to the time and date price and property)
Invalid acceptance can only be made by the offeree, must not change anything and must be communicated to the offeror
(when it does not confirm it to the offer it is a counteroffer/ qualified acceptance, it is a new offer)
offer is binding when offeree communicates acceptance |
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Legal consideration |
Consideration is not required for an agency contract, but something of value is required in contract law |
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Competent parties |
Legal competency
Those who are not legally competent include – minors, the insane, the intoxicated, and the unauthorized |
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Legal purpose |
The object or purpose of the contract must be legal "legality of object", must not be made against public policy, and made on the legal form (in writing via statute of frauds) |
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Ambiguity |
In a contract in which there is conflict – Number spelled out as words have more authority than numerals Type written material has more authority than pre-printed material Handwritten material has more authority than typed material |
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Termination of offers |
Rejection by offeree – earnest money received from offeror should be returned immediately Counteroffer by offeree – qualified acceptance Lapse of time – stated in contract, if no time specified, a reasonable time Revocation by offeror - anytime before communication of acceptance by offeree, earnest money refundable immediately Death - of either party |
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Modifications/alterations of a contract |
Are like counter offers in that –
Terminate offers, creating a new offer Changes must be initialed and dated before proceeding If changes made more than one time in the same day, then time of change must be added |
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Contingencies |
Give offeror a way out if certain events to do or do not occur; the primary reason some contracts don't go to closing is unreasonable contingencies |
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Discharge of contracts |
1. Performance - deal closed! 2. Release – one agrees to let another out of the deal 3. Rescission – usually requires a lawsuit, gives restitution, if someone live in the contract 4. Accord and satisfaction – substitute of terms in the contract or substitution of one contract for another 5. Novation – original party is totally released from liability, release from liability could occur as a result of substitution of parties, for example someone else took over contract, or substitution of terms 6. Assignment – substitution of party, original party receives no novation – the original party is still legally responsible if the assignee defaults 7. Statute of limitations – time limits set by state law |
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4 elements of misrepresentation or fraud |
1. Misstatement Willful = fraud Innocent = misrepresentation 2. Material fact – something the other party would have considered in the decision to act 3. Reliance - an individual depended on the statement in making the decision 4. Resulting damage |
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In cases of misrepresentation and/or fraud on contracts, injured party May… |
Seek non-performance – do not have to follow through with the contract Sue for rescission/restitution – ask a judge to reverse the sale of home Sue for compensatory damages and punitive damages - compensatory is the actual cost of damages and punitive damages are awarded if you can prove fraud |
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Puffing |
Exaggeration that does not rise to the level of misrepresentation. Does not void a contract |
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Excuses for non-performance of contracts |
Frustration of purpose – if purpose was stated in contract and purpose cannot be fulfilled Destruction of subject matter Death – only if previously agreed, otherwise heirs have to keep promises |
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Breach or default of contracts |
A party to the contract fails to perform
A party to the contract gives notice of intent not to perform
A party to the contract does something that makes performance and possible |
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Remedies for breach of contract, the injured party may... |
Excuse the other party from performance Seek liquidated damages – seller keeps earnest money Suit for specific purpose – file a lawsuit to force the other party to perform, easier to get the courts to force the seller to sell than a buyer to buy Suit for compensatory damages – defaulting party pays other party actual damages, damages must be mitigated/minimized |
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Purpose of the purchase and sale agreement |
Clearly state the parties agreement, it is required by law through South Carolina license law and the statute of frauds |
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Contract – principal terms and conditions |
Seller is called vendor Buyer is called vendee
Adequate description of property Purchase price written in English and numerically Contingencies: Who pays which costs? When is buyer given possession? "Time if of the essence" Personal property/fixtures Financing provisions – amount, time, rate, points, LTV etc. Condition of property – inspections, warranties, buying or selling and using the term "as is" Restrictive covenants Who is at risk of loss or damage my property is under contract? Type of deed the buyer will get Seller to deliver marketable title Default provision – breach Death of parties FHA or VA required provisions Earnest money receipt - how is it disbursed at closing, where is it in the meantime? Signatures of all Equitable title |
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Option to Buy |
Option - unilateral contract
Option & Optionor - Binds seller to hold offer
Optionee - acquires no interest in land, acquires right to buy for specific period, at specific price and terms, gives valuable consideration to optionor, is not required to buy, may assign option to another, may want to record and give public notice the option exists |
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Requirements of a valid option |
Final terms of contract to purchase if option is exercised Time is of the essence – this is a contract for time Three dates – date of contract or agreement, date of election (date of notification), date of closing Consideration - essential and must be exchanged or option contract is void |
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When the optionee elects to exercise the option |
A bilateral contract now exist. Optionee acquires equitable title – the right to get the legal title |
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Right of first refusal |
The owner of a right of first refusal is a potential buyer and has no rights to the land
When the owner of the land chooses to sell, the owner must give the holder of the right of first refusal the opportunity to match any acceptable offer
Can make the property less marketable so this is of little benefit to the property owner |
