Texas 30-Hour Law of Contracts – Key Vocabulary

Vocabulary flashcards summarizing the principal terms, laws, and concepts presented in the Texas 30-Hour Law of Contracts lecture notes.

Texas Real Estate Commission (TREC)

State agency that promulgates contract forms, enforces their use, and oversees real estate licensing and regulation in Texas.

TREC Broker-Lawyer Committee

Group that drafts contract forms for TREC; members serve staggered six-year terms and include brokers and attorneys.

Promulgated Forms

Standardized contract forms that TREC requires licensees to use in specified transactions to promote efficiency and consumer protection.

Texas Deceptive Trade Practices – Consumer Protection Act (DTPA)

State law prohibiting false, misleading, or deceptive acts in advertising, selling, or leasing real property.

Unauthorized Practice of Law

Illegal act of giving legal advice or drafting legal documents (including contracts) without being a licensed attorney.

Land

Earth’s surface extending downward to the center and upward into the air, including all natural attachments.

Real Estate

Land plus permanent man-made improvements attached to it, such as buildings and utilities.

Real Property

Land and real estate combined with the legal bundle of ownership rights.

Scarcity

Economic characteristic of real property referring to its limited supply.

Improvements (Economic)

Permanent structural additions that can affect a property’s value.

Permanence of Investment

Long-term stability of returns from improvements like roads or utilities.

Location / Situs

Economic characteristic describing a property’s value based on area preference and market desirability.

Immobility

Physical trait of land indicating its fixed geographic position.

Indestructibility

Physical trait noting that land itself cannot be destroyed, although improvements may deteriorate.

Uniqueness (Inhomogeneity)

Physical characteristic meaning no two parcels of land are exactly alike.

Severalty

Form of ownership in which title is held by one individual or entity.

Joint Tenancy

Co-ownership featuring equal interests, undivided possession, and right of survivorship requiring unity of possession, interest, time, and title.

Tenancy in Common

Co-ownership where each owner holds an undivided interest that is inheritable and lacks survivorship.

Separate Property

Property solely owned by one spouse, typically acquired before marriage or by gift, devise, or descent.

Community Property

Property acquired during marriage that is owned equally by both spouses in Texas.

Essential Elements of a Valid Contract

Legally competent parties, offer and acceptance, consent, lawful purpose, consideration, and (for real estate) written form with signatures.

Express Contract

Agreement with clearly stated terms, orally or in writing.

Implied Contract

Obligation created by the actions or conduct of parties rather than explicit words.

Unilateral Contract

Contract in which only one party is obligated to perform.

Bilateral Contract

Contract in which both parties make binding promises.

Executory Contract

Agreement in which some contractual duties remain unperformed.

Executed Contract

Agreement in which all parties have fully performed their obligations.

Void Contract

Agreement with no legal force or effect from the outset.

Voidable Contract

Contract that one or more parties may legally rescind due to a defect such as lack of capacity.

Enforceable Contract

Agreement that can be upheld in court; unenforceable contracts cannot be legally compelled.

Police Power

Government authority to enact regulations for public health, safety, and welfare that can limit property use.

Eminent Domain

Government power to take private property for public use with just compensation.

Taxation (Government Power)

Authority to levy property taxes and place liens for non-payment.

Escheat

Transfer of property to the state when an owner dies intestate without heirs or creditors.

Encumbrance

Claim, lien, easement, or restriction that limits a property owner’s rights or value.

Lien

Creditor’s legal claim against property as security for a debt.

Easement

Right acquired by one party to use the land of another for a specific purpose.

Deed Restriction

Private limitation written into a deed that controls or limits property use.

Freehold Estate

Ownership interest held for an indeterminate length of time, such as fee simple or life estate.

Leasehold Estate

Interest granted to a tenant for a limited, defined period as in renting.

Texas Homestead

Legal life estate in a primary residence that provides protections and acreage limits (10 urban acres, 200 rural family acres, 100 rural single).

Riparian Rights

Rights of landowners to reasonable use of flowing water (rivers/streams) adjacent to their land acquired before 1895 in Texas.

Littoral Rights

Rights to use and enjoy standing waters (lakes/oceans) bordering the property.

Rule of Capture

Doctrine granting Texas landowners ownership of groundwater they can drill and produce from beneath their land.

Assignment (Contract)

Transfer of contractual rights to a new party while original party remains secondarily liable.

Novation

Substitution of a new party or new contract, releasing the original party from liability.

Statute of Limitations (Texas Contracts)

Law giving parties four years from the date of breach to file suit on a contract.

Exclusive Right to Sell Listing

Listing agreement giving one broker the sole right to market the property and earn commission regardless of who finds the buyer.

Exclusive Agency Listing

Listing in which a broker earns commission only if the broker (not the owner) procures the buyer.

Open Listing

Non-exclusive listing allowing multiple brokers; only the procuring broker earns commission.

Net Listing

Listing in which seller sets a net price and broker keeps any excess; allowed in Texas under strict regulation.

One to Four Family Residential Contract (Resale)

TREC-promulgated sales contract used for most resale residential properties in Texas.

Statute of Frauds

Law requiring real estate sales contracts to be in writing and signed to be enforceable.

Contingency

Contract condition that must be met for the agreement to proceed, such as financing or inspection.

Amendment

Signed change to an existing contract; TREC provides a standard Amendment to Contract form.

Addendum

Supplemental document that becomes part of the contract once signed; TREC offers many standardized addenda.

Mortgage

Lien instrument that secures real property as collateral for a loan and gives the lender foreclosure rights.

Deed of Trust

Three-party security instrument (borrower, lender, trustee) used in Texas title theory states to secure real estate loans.

Promissory Note

Borrower’s written promise to repay a specified sum under agreed terms.

Federal Reserve System (The Fed)

Central U.S. banking system that regulates money supply and influences interest rates.

Primary Mortgage Market

Marketplace where lenders originate home loans to borrowers.

Secondary Mortgage Market

Marketplace where existing mortgage loans are bought and sold as investments (e.g., Fannie Mae, Freddie Mac).

Conventional Loan

Mortgage not insured or guaranteed by a government agency, typically requiring higher down payments.

Governmental Loan

FHA, VA, or USDA-backed mortgage allowing smaller down payments but usually requiring mortgage insurance.

Conforming Loan

Mortgage that meets secondary-market standards, making it easier to sell to investors.

Non-conforming Loan

Mortgage that fails to meet secondary-market criteria, making resale to investors difficult.

Title Theory State

State in which a deed of trust conveys title to a trustee until the loan is repaid; Texas follows this model.

Voluntary Alienation

Transfer of property with the owner’s consent, such as by deed or will.

Involuntary Alienation

Transfer of property without the owner’s consent, such as through foreclosure or eminent domain.

Deed (Required Elements)

Written instrument with grantor’s signature, legal description, consideration clause, granting and habendum clauses, warranties, and delivery to grantee.

Probate

Court process validating a will and overseeing distribution of a deceased person’s estate.

Certificate of Title

Document stating the condition of title based on a title search; may be used to prove ownership.

Title Insurance

Policy protecting owners or lenders against losses from title defects or undiscovered liens.

Proration

Division of expenses (taxes, interest, utilities) between buyer and seller based on time of ownership.

Effective Date (Contract)

Date on which all parties have signed and delivered the contract, starting contractual deadlines.

Quiet Title Action

Court proceeding to resolve title defects or disputes and establish clear ownership.