Real Estate Contract Law - Chapters 1-6 Key Terms

A comprehensive set of vocabulary flashcards covering key real estate contract concepts from Chapters 1–6.

Competent parties

Parties must be alive, of legal age, and of sound mind at the time of acceptance for a contract to be valid.

Offer and acceptance (meeting of the minds)

Agreement by both parties to the same terms; the buyer makes the offer, and the seller’s acceptance creates a binding contract.

Offeror

The party who makes the offer.

Offeree

The party who receives the offer.

Withdrawal of offer

An offer can be withdrawn any time before acceptance and communication back to the offeror.

Counteroffer

A rejection of the original offer and a new offer; the offeror/offeree roles switch and the original offer is voided.

Multiple offers

All offers must be presented to the seller at the same time; seller can accept, reject, or counter.

Equitable title

Buyer’s interest after acceptance, giving the right to obtain the deed later and to sue for specific performance.

Consideration

Something of value exchanged in a contract; usually money; earnest money is not required but strengthens the offer.

Earnest money

Good faith deposit held in escrow; not required but strengthens the offer; may be liquidated damages if specified.

Legal object (lawful purpose)

The contract must be for a lawful activity; illegal contracts are void.

Statute of Frauds

Real estate contracts must be in writing to be enforceable.

Parol Evidence Rule

Oral statements cannot contradict or vary the written contract; written terms govern.

Signatures

All parties must sign the contract for it to be enforceable.

Legal description

A legal description of the land and its fixtures included in the conveyance.

Express contract

A contract created by explicit written or spoken statements of intent.

Implied contract

A contract created by actions rather than explicit agreement.

Bilateral contract

A two-way promise; both parties commit to perform.

Unilateral contract

A one-way promise; performance by one party triggers the contract.

Executory contract

Promises have been made but not yet performed (pending closing).

Executed contract

All promises have been fulfilled; the contract is complete.

Time is of the essence

Deadlines must be met promptly; failure can void or breach the contract.

Valid and enforceable contract

A contract that has all essential elements and is enforceable in court.

Void contract

No contract at all; lacks essential elements or capacity (e.g., mental incapacity).

Voidable contract

A valid contract that one party may void due to issues like minority, duress, or misrepresentation.

Misrepresentation

False statement of a material fact that can render a contract voidable.

Puffing

Subjective opinions or hyperbole; not legally actionable as misrepresentation.

Assignment

Transfer of contractual rights to a third party, usually allowed unless prohibited.

Novation

Replacement of an old contract with a new one involving a new party; can replace the obligation.

Personal services contract

Contracts based on personal qualifications; generally non‑assignable (e.g., listing agreements).

Option contract

Seller grants the option to buy within a definite time and price; unilateral until exercised.

Right of first refusal

Right to have the first opportunity to buy if the property is offered for sale; no definite price.

Option money

Payment for the option; seller keeps it whether or not the option is exercised.

Financing contingency

Buyer’s purchase contingent on qualifying for a loan; may allow recovery of earnest money if failed.

Due diligence clause

Buyer’s inspection period; if problems are found, the contract may be cancelled.

Mediation

Nonbinding dispute resolution with a neutral mediator; agreement to settle may lead to court action if unresolved.

Arbitration

Binding dispute resolution by a neutral arbitrator; decision is final and enforceable.

Specific performance

Court order forcing completion of the contract when money damages are inadequate.

Liquidated damages

Pre‑agreed damages (often earnest money) if a party breaches; amounts are set in the contract.

Escrow account

Neutral account that holds money or documents for parties until contract closing.

Commingling

Mixing escrow funds with a broker’s own funds; illegal and subject to penalties.

Conversion

Using someone else’s money for personal use; an illegal act in escrow contexts.

Addendum

A document added to the contract to extend or add terms; signed by all parties.

Amendment

A document that changes terms of the original contract; signed by all parties.