Chapter 11: Real Estate Contracts

Front 1

contract

Back 1

voluntary, legally enforceable promise between 2 competent parties to do or not do some legal act in exchange for consideration

in MA, both written and oral contracts are allowed, but must be written in order to be enforceable

Front 2

What are the elements of a valid contract?

Back 2

-Voluntary
-an agreement or promise
-made by legally competent parties (in MA 18 yrs or older and mentally competent)
-supported by legal consideration (money, a promise, or anything of value)
-for a legal act (can't enter a legal contract for something illegal)

Front 3

express contract

Back 3

a contract expressed through writing or orally

Front 4

implied contract

Back 4

a contract expressed by their acts and conduct

Front 5

bilateral contract

Back 5

contract where a promise is made in exchange for another promise

(i.e. exclusive right to sell listing)

Front 6

unilateral contract

Back 6

contract that is a one-sided agreement/promise

(i.e. open listing)

Front 7

executed contract

Back 7

a contract that has been fulfilled/completed

Front 8

executory contract

Back 8

a contract that still has an act/promised to be fulfilled/completed

Front 9

valid contract

Back 9

a contract that meets all the essential elements that make it legally sufficient and enforceable and is binding in a court of law

Front 10

void contract

Back 10

a contract that is not legally enforceable because it lacks one or all elements

Front 11

voidable contract

Back 11

a contract that appears to be legal but is illegal

a contract that appears to have all the elements of a valid contract but may be rescinded by one or both parties based on some legal principle

Front 12

unenforceable contract

Back 12

a contract that appears to be valid and is enforceable only between the parties; is not able to be legally enforced

Front 13

time is of the essence clause

Back 13

used to specify the period of time in which a contract is performed

-always done within reasonable time, otherwise courts will declare contracts invalid

Front 14

assignment

Back 14

transfer of rights or duties under a contract; substitution of parties

-usually a 3rd party is delegated to perform certain obligations with the original party holding liability (unless otherwise released from duty)

Front 15

novation

Back 15

substitution of a new contract to discharge an old obligation

-has new charges

Front 16

breach of contract

Back 16

violation of any of the terms or conditions of a contract without legal reason

Front 17

suit for specific performance

Back 17

forces a party to perform an action

in which a buyer or seller can sue the other party for the property and damages, costs or hardships due to the violation of the contract

Front 18

rescission

Back 18

cancellation of a contract and returns parties to their original positions before the contract

(any monies exchanged are to be returned)

Front 19

counteroffer

Back 19

new offer that rejects the original offer

offer and counteroffer can be withdrawn at any time before it has been accepted

Front 20

earnest money

Back 20

a deposit (usually in the form of a check) that the purchaser provides when making an offer to purchase real estate

a form of evidence of the buyer's intention to carry out the terms of the contract in good faith

Front 21

escrow contract

Back 21

agreement between the buyer, seller, and escrow holder

formed when earnest money is deposited into the broker's escrow account; if an offer is not accepted the money is immediately returned to the would-be buyer

Front 22

commingling

Back 22

earnest money mixed with a broker's personal funds

Front 23

coversion

Back 23

brokers using earnest money for their own personal use

Front 24

equitable title

Back 24

an interest in real estate

a buyer holds equitable title when the buyer signs a contract to purchase property; is not actual title, but they have right to ownership even if the title is held in another person's name

Front 25

liquidated damages

Back 25

an amount of money predetermined by the parties to compensate an injured party should the other party breach the contract

Front 26

contingencies

Back 26

additional conditions that must be satisfied before a contract is fully enforceable

Front 27

What are the 3 most common contingencies?

Back 27

mortgage contingency
inspection contingency
property sale contingency

Front 28

amendment

Back 28

a change or modification to the existing content of a contract

Front 29

addendum

Back 29

a provision added to an existing contract without altering the content of the original

Front 30

option

Back 30

a contract by which an optioner gives an optionee the right to buy or lease the owner's property at a fixed price within a certain period of time

usually for commercial real estate - when a tenant can rent but has the option to buy a landlord's property provided that specific conditions be met

Front 31

land contract

Back 31

aka contract for deed, bond for title, installment contract, land sales contract, or articles of agreement for warranty deed

in which a vendor (the seller) retains legal title of a property but the vendee (the buyer) takes possession and gets equitable title to the property

the vendor is not obligated to execute and deliver a deed to the buyer until the terms of the contract are satisfied

Front 32

rescission

Back 32

both parties agree not to buy/sell