Unit 11: Real Estate Contracts

Comprehensive flashcards for Unit 11: Real Estate Contracts, covering essential vocabulary, New Jersey-specific legal requirements, and situational contract scenarios.

Assignment

Transfer of interest in a contract to a third party

Bilateral contract

Contract with a promise by each party, where all parties to the contract are bound to perform

Breach of contract

Violation of a contract

Competent parties

Those legally qualified to enter into contracts

Consideration

Something of value given in exchange

Contingency

Certain happening on which a contract depends, such as a buyer purchasing only if his wife approves the home within $5$ working days

Contract

Agreement between two parties to perform some legal act(s)

Counteroffer

Offer returned to offeror with changes by offeree; for example, if a seller changed a requested closing date, either party is free to walk away

Earnest money

Buyer's deposit with purchase contract, which a broker must deposit within $5$ business days of receipt

Equitable title

Interest acquired by buyer with land contract

Escape clause

Protection for seller when buyer has another house to sell

Executed contract

Contract that has been fulfilled or one that has been signed, depending on the contract

Executory contract

Contract that has not yet been performed, such as the status of a real estate sales contract between the time it is signed and before title actually passes

Express contract

Contract set down in so many words

Implied contract

Contract not put into words but shown by actions, such as when a person fills her gas tank at a station and is then required to pay

Land contract

Agreement under which buyer pays in installments and waits for deed

Liquidated damages

Sum agreed on to serve as damages in case of future default

Novation

Substitution of a new contract for an existing one

Offer and acceptance

The process of reaching a meeting of the minds

Option

Contract binding one party while the other party is free to act or not; also called a unilateral contract

Parol evidence rule

Convention that a written contract overrides spoken promises; for example, if a written agreement does not mention appliances, the buyer has no right to them even if verbally promised

Rescission

Return to the status quo

Specific performance

Court action usually asking that the seller be forced to sell as agreed, or a suit asking for a forced sale or purchase

Statute of frauds

Law requiring certain contracts to be in writing

Statute of limitations

Time within which one is allowed to assert a legal right

Time is of the essence

Contract clause requiring punctual performance; if this clause is omitted and the closing date passes, the contract remains valid and enforceable

Unenforceable contract

Seemingly valid contract but neither party can sue to force performance

Valid contract

Contract that meets all legal requirements and is a legally enforceable agreement; in New Jersey, it must include an adequate or legal description of the property

Void contract

Contract that does not meet all legal requirements

Voidable contract

Contract that is binding, but one party may disaffirm it

A person drives into a gas station and tops off her gas tank. Why is she required to pay for the gas?

She created an implied contract when she filled her tank with gas

A 17-year-old man signs a contract to buy a house for himself and his wife. What is the status of this contract in NJ?

The contract is valid (because he's married, it's not voidable)

A broker found a buyer who made a written offer for less than asking price with a $5,000 earnest money check. The seller verbally accepted by phone, relayed to the buyer. What is the status of both parties?

Neither party is obligated because the seller's acceptance and the buyer's notification were made verbally

A buyer's offer was presented and accepted/signed by the seller. Meanwhile, the buyer had a change of heart and instructed her agent to cancel the offer. What is the status?

There is no agreement because the buyer withdrew her offer before being notified of the seller's acceptance

For what sales contracts may New Jersey real estate brokers and their salespeople fill in the blanks?

1-4 family residential properties

For which type of properties do buyers have a seven-day period in which they may cancel the sales contract?

A Certain condominiums (newly constructed)

In filling out the sales contract, someone crossed out and replaced certain words. What is the usual procedure to eliminate future controversies?

Have both parties initial or sign in the margin near each change

Unilateral Contract

Another name for an option contract

The sales contract says the buyer will purchase only if his wife approves the home within five working days. What is this type of condition called?

A contingency

Buyers made a written offer with drapes included and a Saturday noon deadline. Sellers agreed to price but struck the drapes request; buyers had not responded when sellers' agent later agreed to include drapes. What is the buyers'status?

The buyers are not obligated to buy the property