A contract is a legally enforceable agreement to do (___________) or not to do (_____________) a specific thing.
Texas statute protect contractual rights.
true; defaulting party can be sued
A contract must meet requirements in order to be enforceable. What are these requirements?
-competent parties; legal age, sane and sober; unless emancipated, married or military
-Consideration; a promise given in exchange for a promise; purchase agreement; promise to sell and the promise to purchase; paragraph 1 of the promulgated forms.
-Mutual agreement; both parties enter the contract freely and voluntarily.
-Lawful Objective; provision must comply with federal, state, and local laws.
-In writing and signed by the parties; statute of Frauds requires the contract to be in writing
-Contain a legal description; 1. reference to recorded plat (lot, block, section number, subdivision name); and 2. metes and bounds.
What is an attorney-in-fact?
serves in a fiduciary capacity to the person who make the appointment; the signature of the attorney-in-fact binds a party just as effectively as the party's own signature.
Licensees dealing with corporate-owned real estate should remember who can only sign a contract for and on behalf of the corporation, which is...
only an officer named in a corporate resolution, passed at a meeting of the board of directors
Earnest money is used as consideration for a valid contract.
false; just a promise to sell and a promise to buy is efficient
A listing broker best fulfills the fiduciary duty to the seller by encouraging a substantial amount of earnest money.
____________ are monies paid to a non-defaulting party under the terms of a contract as opposed to money damages, which are determined and awarded by a court.
The one type of contract that requires a prospect to tender money to bind the agreement is...
an option contract; an option to purchase or an option to terminate.
-in an option contract, the property owner gives a promise and the purchaser gives money to purchase a legal right and to bind the agreement.
Offers and counteroffers should always be in writing.
One does not have a binding executory contract until what three things are accomplished?
1. a written offer has be made
2. a written acceptance has occured
3. the offeror has been notified of the acceptance
The only exception to the writing rule is...
a lease for one year or less.
A street address does constitute as an adequate description of the property for contract and conveyance purposes.
false; legal description are 1. reference to a recorded plat (lot, block, section number, subdivision name); and 2. metes and bounds
**called for by the Statute of Frauds
The _____________ requires that, to be enforceable, all agreements affecting title to or interest in real estate in Texas be in writing and signed by the parties.
Statute of Frauds
What should be the first thing you do when meeting with a protential client?
1. ask if they are working with another realtor
2. ask if they have been pre-qualified; its a document the GFE Good Faith Estimate
Void means the absence of something.
A void contract could be enforceable.
An _____________ contract is an agreement that had all six elements at the time it became an executory contract but, due to a change in conditions, no longer meets the requirements of law and no longer can be upheld by a court.
What are some examples of a contract becoming voidable?
-contract with a minor
-seller fails to provide promised provisions
What makes an executed or enforceable contract?
When an offeror has presented a written offer, the offeree has accepted the offer in writing, and the offeror has been notified of the acceptance.
What is the difference between an executory contract and an executed contract?
Executory contract: enforceable contract that is in the process of being performed or fulfilled; agreed promises
-Executed; is a contract that is fully fulfilled, negotiated and signed by the parties; fulfilled all promises; complete
In Texas, executory is a term limited in meaning to include only a contract-for-deed (land sales contract), lease-purchase, or lease-option transaction.
Purchase contracts are which one... Bilateral or unilateral contracts???
Bilateral contracts; involves a promise in exchange for a promise
An unilateral contract is...
a promise in exchange for an act; the seller agrees to pay the listing broker when and if the broker produces a ready, willing, and able buyer
Most real estate-related contracts are bilateral agreements.
Is an Independent Contractor Agreement a bilateral or unilateral contract?
bilateral contract; defines the working relationship between the salesperson and sponsoring broker
Is a Lease a bilateral or unilateral contract?
bilateral contract; defines what the tenant may or may not do during the term of the leasehold, and what the property owner may or may not do during the term of the leasehold
Is an Option to purchase a bilateral or unilateral contract?
a unilateral agreement; binds the property owner and prevents them from selling the property to another party, but does not bind the prospective purchaser to purchase
Is an Option to terminate a bilateral or unilateral contract?
unilateral agreement; binds the property owner to release the prospective purchaser from all obligations if the purchaser elects to walk away during the defined option period.
A listing agreement can be either a unilateral or bilateral agreement.
true; although most listing agreements are for an exclusive-right-to-sell agency and involves an exchange of promises and obligations (only a nonexclusive or open listing may be a unilateral agreement)
Is a Buyer representation agreement a bilateral or unilateral contract?
bilateral agreement; defines the working relationship between a buyer and the buyer's agent, and creates an exclusive agency relationship.
Is a purchase agreement a bilateral or unilateral contract?
ALWAYS bilateral; calls for each of the parties to perform certain actions and/or fulfill certain promises defined in the agreement.
What does time is of the essence mean?
-the contracting parties agree that strict adherence to the time frames recited in the contract is an essential part of their agreement.
Only the Option to Terminate paragraph in the six promulgated contract forms and the six addenda include time is of the essence. What are the six addendas?
Addendum for Sale of Other Property by Buyer, Addendum for Back-Up Contract,
Third Party Financing Addendum for Credit Approval,
Reverse Mortgage Financing Addendum, and Short Sale Addendum.
A real estate broker or salesperson should never add the words time is of the essence to a contract or advise a customer or client to do so.
true; counsel a real estate attorney before doing so.
All 365 days of the year have equal status.
The word after does not include the effective day of the contract.
true; if the effective date of the contract is June 14, and the time frame calls for seven days, the time period will end at midnight on June 21.
An ___________ is a change or modification to the existing content of a contract.
Any time words or provisions are added to or deleted from the body of the contract, the contract has been...
Amendments and addendums must be signed by ALL parties.
An _____________ contains additional info that is part of the original contract/agreement.
All addenda must be listed in the ___________________ paragraph in the TREC-promulgated contract form.
Agreement of the Parties paragraph
It is a violation of TREC Rule for a licensee to write something in Special Provisions if TREC has an addendum that addresses the situation.
An assignment is...
the transfer of one's legal rights to another party.
An assumption is...
To take on personal liability for a legal obligation made by another person.
A party may transfer interest to another legal entity unless prohibited by statute or written agreement of the parties.
true; purchase contracts are usually assignable, whereas leases, by statute, may not be assigned without the express written permission of the property owner.
The _________ is the party who transfers a right, and the __________ is the party to whom the right is assigned.
assignor; is not released from the obligations of the contract; in an assignment
assignee; takes on all of the rights and obligations of the contract being assigned.
When a new borrower assumes the existing loan obligation, the original borrower is not discharged of his obligations unless specifically released from the obligations by the lender. This is an example of...
The replacement of an existing contract with a new contract is known as a...
*Releases all of the terms and obligations of the original agreement
In Texas, the statute of limitations for filing a legal suit on a written contract is ___ years.
If one of the parties defaults under the contract and the other party chooses to sue that party for specific performance and/or damages, that lawsuit must be filed within the statute of limitations time period.
The statute of limitations varies for different legal actions.
For example the statute of limitations period for disclosure issues, if a buyer discovers a problem that the sellers knew about, begins at the time...
the buyers discover the problem.
A violation of any of the terms or conditions of a contract without legal reason is called.
breach of contract
A ___________________ clause in a real estate purchase contract specifics the amount of money the seller is entitled to if the buyer breaches the contract.
liquidated damages clause
Ex: earnest money
Once one of the parties accepts the earnest money as liquidated damages, everyone is released from the contract with no further remedies.
An oral agreement of sale is void and unenforceable.