State Exam Prep Book: Contracts

Front 1

acknowledgment

Back 1

A formal declaration made before an authorized person, e.g., a notary public, by a person who has executed an instrument stating that the execution was his or her free act. In this state an acknowledgment is the statement by an officer such as a notary that the signatory to the instrument is the person represented to be.

Front 2

addendum

Back 2

An attachment to a contract, rental or lease agreement for incorporating any provision agreed to but not included in the boilerplate provisions of the agreement.

Front 3

attorney fee provision

Back 3

A provision in an agreement permitting the prevailing party to a dispute to receive attorney fees when litigation arises due to the agreement.

Front 4

bi-lateral contract

Back 4

A promise for a promise, such as a purchase agreement or a listing agreement.

Front 5

boot

Back 5

Receipt of an item not of like-kind property, such as cash or mortgage relief, in a tax deferred exchange.

Front 6

capable parties

Back 6

Parties who can be held responsible for the performance of their obligations under a contract. One of the essential elements needed to form a contract.

Front 7

choice-of-law provision

Back 7

A clause which sets the state law applicable in the event of a dispute.

Front 8

consideration

Back 8

Anything given or promised by a party to induce another to enter into a contract. It may be a benefit conferred upon one party or a detriment suffered by the other.

Front 9

contract

Back 9

An agreement to do or not to do something. Four essential elements are needed to be valid: parties capable of contracting, consent of the parties, a lawful object, and consideration. A contract for sale of real property must also be in writing and signed by the parties to be charged with performance.

Front 10

counteroffer

Back 10

An alternative response to an offer received consisting of terms different from those of the offer rejected

Front 11

credit application

Back 11

A document prepared by a prospective tenant which includes a provision authorizing the investigation and receipt of information on the applicant's creditworthiness.

Front 12

deed

Back 12

Written instrument which when signed and delivered (executed) conveys title to real property from one person (grantor) to another (grantee).

Front 13

enforceable contract

Back 13

An agreement which meets minimum elemts needed to be enforceable in court.

Front 14

escrow instructions

Back 14

Directives an escrow officer undertakes, as given by buyer and seller, or lender and borrower to coordinate the closing on a purchase agreement or mortgage origination.

Front 15

essential elements of a contract

Back 15

Four conditions required to form a legal contract: capable parties, acceptance, legal object and consideration.

Front 16

exchange

Back 16

A trading between two or more owners of their equities in different properties.

Front 17

exclusive agency listing

Back 17

An agreement employing a broker as the sole agent for the seller of real property in which the seller promises to pay the broker a fee if the property is sold unless the sale is by the owner acting without the services of any agent.

Front 18

exclusive right-to-sell listing

Back 18

An agreement employing a broker to act as agent for the seller of real property in which the seller promises to pay the broker a fee if the property is sold during the period of the employment, whether by the broker, through another broker or by the efforts of the owner.

Front 19

execution

Back 19

The signing and delivery of a document, as occurs on a seller's acceptance of an offer to buy real estate by signing and delivering the signed document to the buyer.

Front 20

forbearance agreement

Back 20

An agreement that the lender will temporarily reduce monthly mortgage payments for the homeowner at risk of default, without altering the original loan terms.

Front 21

fraud

Back 21

The intentional use of deception to induce another person to act against their best interests resulting in the loss of property or money.

Front 22

graduated rent provision

Back 22

A rent provision in a nonresidential lease agreement which periodically increases the initial monthly rent in pre-set increments over the term of the lease.

Front 23

grant deed

Back 23

A document used to pass a fee simple interest in real estate from the grantor to another individual, unless a lesser interest is stated.

Front 24

gross lease

Back 24

A nonresidential lease specifying that the tenant pays for their utilities and janitorial fees, but unless modified is not responsible for any other care, maintenance or carrying costs of the property.

Front 25

ground lease

Back 25

A leasehold interest for which rent is based on the rental value of the land, whether the parcel is improved or unimproved.

Front 26

guarantee agreement

Back 26

An agreement to be obligated to pay the debt or perform on a contract of another person if that person defaults or does not perform.

Front 27

habendum clause

Back 27

The "to have and to hold" clause in a deed.

Front 28

hold harmless clause

Back 28

A provision in an agreement that shifts liability between parties.

Front 29

installment note

Back 29

A note calling for periodic payments of principal and interest, or interest only, until the principal is paid in full by amortization or a final balloon payment.

Front 30

instrument

Back 30

A document which formally express the rights of the parties, for the purpose of creating, modifying or terminating a right. A mortgage lender's basic instruments are promissory notes, deeds of trust, with some sellers using installment sales contracts; landlord instruments include lease agreements.

Front 31

lease agreement

Back 31

The written document which sets the terms of a fixed-term tenancy.

Front 32

letter of intent

Back 32

A non-binding proposal signed and submitted to a property owner to start negotiations to rent or buy a property.

Front 33

liquidated damages provision

Back 33

A provision in a purchase agreement specifying the amount of money the seller will receive from the buyer if the buyer breaches the agreement.

Front 34

listing

Back 34

An employment contract between principal (owner) and agent authorizing the agent to perform services for the principal involving the sale of property; listing contracts are entered into for the purpose of locating persons to buy, lease, or mortgage property. Employment of an agent by a prospective purchaser or lessee to locate property for purchase or lease is also considered a listing.

Front 35

loan application

Back 35

The loan application is a source of information on which the lender bases a decision to make the loan; sets out the amount and repayment terms of the mortgage sought, identifies the borrower, place of employment, salary, bank accounts, assets, personal debts and expenses and credit references, and describes the real estate that is to be mortgaged.

Front 36

loan assumption

Back 36

When a buyer takes over an existing mortgage and becomes primarily responsible for payment on the debt.

Front 37

mutual consent

Back 37

A meeting of the minds between the parties to a transaction. One of the four essential elements of a contract.

Front 38

net lease

Back 38

A commercial lease which transfers to the tenant the obligation, unless modified, to pay all of the costs of ownership in addition to utilities and janitorial services.

Front 39

net listing

Back 39

A type of listing in which the agent's fee is set as all sums received exceeding a net price established by the owner.

Front 40

note

Back 40

A document, often secured by a trust deed on real estate, evidencing an obligation to pay money to a creditor, usually a lender or carryback seller.

Front 41

offer to lease

Back 41

A document which sets forth all crucial elements typically negotiated to bring the landlord and tenant together in final leasing arrangements.

Front 42

open listing

Back 42

An employment entered into by a broker to render real estate services on a best-efforts basis under which a fee is due to the broker if they achieve the client's objective of the employment before the client or another broker separately first meet the objective, such as the sale or locating of a property.

Front 43

option listing

Back 43

A variation of the exclusive right-to-sell listing in which the seller grants the broker an option to buy the property at a predetermined price, if the property does not sell during the listing period.

Front 44

option to buy

Back 44

An agreement granting an irrevocable right to buy property within a specific time period.

Front 45

option to extend

Back 45

An agreement granting a tenant the right to extend possession under their lease agreement on terms set out in the option to extend.

Front 46

option to renew

Back 46

An agreement granting a tenant the right to continue in possession upon expiration of the existing lease under a new lease agreement on the same conditions as the expiring lease agreement on terms for payment of rent set out in the option to renew.

Front 47

promissory note

Back 47

A document given as evidence of a debt owed by one person to another.

Front 48

purchase agreement

Back 48

The primary document used as a checklist to negotiate a real estate sales transaction between a buyer and seller.

Front 49

qualified endorsement

Back 49

The payee's signature on the back of a check with the words for deposit only.

Front 50

quitclaim deed

Back 50

A document used to convey whatever interest, if any, the grantor may hold in the real estate.

Front 51

rejection

Back 51

When a person chooses not to accept the terms of an offer.

Front 52

rescission

Back 52

The termination of an agreement or transaction from its inception by mutual consent of the participants to the agreement or transaction, or by one participant based on fraud or misrepresentation of another participant.

Front 53

revocation

Back 53

When the person making an offer withdraws their offer prior to delivery of the signed acceptance.

Front 54

Structural Pest Control report (SPC)

Back 54

A report disclosing any active infestations, damage from infestations or conditions which may lead to infestations.

Front 55

tender

Back 55

To make an offer.

Front 56

time-essence provision

Back 56

A purchase agreement provision declaring that dates for performance of any activity or occurrence of an event are to be strictly enforced as essential to the continuation of the transaction.

Front 57

title report

Back 57

A report which discloses the condition of the title, made by a title company preliminary as a revocable offer to issue title insurance policy.

Front 58

triple net lease

Back 58

A commercial lease which passes the responsibility for all costs and maintenance of the property to the tenant.

Front 59

unenforceable

Back 59

A contract that cannot be enforced in court of law.

Front 60

Uniform Residential Loan Application

Back 60

A standardized mortgage application completed by the buyer with the assistance of the transaction agent and the mortgage lender's representative.

Front 61

use-maintenance provision

Back 61

A provision in a commercial lease agreement which establishes the landlord's and tenant's responsibility for the care and maintenance of the premises during the lease term.

Front 62

voidable contract

Back 62

That which is capable of being adjudged void, but is not void unless action is taken to make it so.