Day 4 NJ RE Exam Study

What are the 5 essential elements of a valid contract?

Offer and acceptance, consideration, competent parties, reality of consent, legal purpose.

What is an offer in contract law?

A proposal by one party proposing specific terms that the other party can accept or reject.

What is acceptance?

Agreement by the other party to all the terms of the offer exactly as stated.

Can an offer be withdrawn?

Yes, an offer can be withdrawn anytime before acceptance. Once accepted, the contract is binding.

What happens to the original offer when a counteroffer is made?

The original offer is cancelled. A counteroffer is a new offer that the original offeror can accept or reject.

What is consideration in a contract?

Something of value that each party gives up. Both parties must exchange value for the contract to be valid.

Does the amount of consideration have to be "fair"?

No. Courts don't judge whether a deal is good or bad, only whether consideration exists and was exchanged mutually.

What are competent parties?

Parties who have legal capacity to enter into a contract: adults (18+), of sound mind, not under guardianship.

Who is NOT a competent party?

Minors (under 18), persons with severe mental illness, persons under guardianship, corporations acting outside their authority.

What is reality of consent?

All parties must genuinely agree without duress, fraud, or unilateral mistake.

What is duress?

One party is forced into a contract by threat, coercion, or harm. Duress voids the contract.

What is fraud in contract law?

One party intentionally misrepresents material facts. Fraud voids the contract and the victim can sue for damages.

What is a mutual mistake?

Both parties misunderstand a critical fact about the contract. May void the contract.

What is a unilateral mistake?

Only one party misunderstands a critical fact. Generally does NOT void the contract.

What is legal purpose in a contract?

The contract must be for a lawful purpose. Contracts for illegal activities are void.

What is a void contract?

A contract with no legal effect; neither party can enforce it. It's as if the contract never existed.

Give an example of a void contract.

A dual contract used to fraudulently inflate property value for insurance/lending purposes.

What is a voidable contract?

A contract that one party can enforce or reject, but the other party cannot force to be enforced against them.

Give an example of a voidable contract.

A lease signed by a minor. The minor can enforce it, but the landlord cannot enforce it against the minor.

What is an unenforceable contract?

A valid contract that cannot be enforced due to legal technicalities (not in writing, statute of limitations expired, etc.).

What is the Statute of Frauds in real estate?

A law requiring that contracts for the sale of land must be in writing to be enforceable.

What is the Statute of Limitations?

The time period within which a contract must be enforced. After the time expires, the contract cannot be enforced.

When is a contract considered performed or discharged?

When all 5 elements are met, all terms are fulfilled, and both parties have done what they promised.

Can a party enforce a verbal real estate purchase agreement?

No, under the Statute of Frauds, real estate contracts must be in writing to be enforceable.

What happens if a contract lacks consideration?

The contract is not valid because one or both parties did not exchange value.