Real Estate Contracts Review

A comprehensive set of vocabulary flashcards covering real estate contract principles, types, validity, and remedies based on the lecture notes.

Contract

A legally enforceable agreement between two or more competent parties.

C.O.L.I.C.

The acronym representing the five requirements for a valid contract: Consideration, Offer & Acceptance, Lawful Objective, In Writing, and Competent Parties.

Consideration

Money, services, promises, or "something of value" exchanged in a contract; earnest money is NOT considered this.

Earnest Money

A good-faith deposit that is often a tested trick question because it is NOT legally required as consideration for a contract.

Offer & Acceptance

A requirement for contract validity where the offer must be clear, definite, and communicated, and the acceptance must be a mirror image and unconditional.

Lawful Objective

A requirement that the purpose of a contract must be legal, also referred to as a "meeting of the minds."

Statute of Frauds

A law requiring that real estate contracts must be in writing to be enforceable.

Competent Parties

Individuals of legal age, sound mind, and not intoxicated who are capable of entering into a contract.

Bilateral Contract

A contract where promises are exchanged by both parties, such as a Purchase and Sale Agreement.

Unilateral Contract

A contract where only one party makes a promise, such as an Option Contract.

Express Contract

A contract that is clearly written or spoken.

Implied Contract

A contract created by the actions of the parties, which is rare in real estate.

Executory Contract

A contract that is still in progress, such as one that is under contract but has not yet closed.

Executed Contract

A contract where all obligations have been fully performed, such as a completed closing.

Valid Contract

A contract that meets all C.O.L.I.C. requirements.

Void Contract

A contract that has no legal effect from the start, such as one for an illegal purpose.

Voidable Contract

A contract that appears valid but one party has the right to cancel, such as a contract with a minor or one signed under duress.

Unenforceable Contract

A contract that is valid but cannot be enforced in court, such as an orally agreed real estate sale or one past the statute of limitations.

Mutual Rescission

The discharge of a contract when both parties agree to cancel it.

Assignment

The transfer of contract rights to another party while the original party remains liable unless a novation occurs.

Novation

The substitution of a new party or a new contract, which releases the old party from liability.

Suit for Specific Performance

A court remedy for breach of contract where the court forces the defaulting party to perform; commonly used by buyers against sellers.

Liquidated Damages

A pre-agreed amount (typically the earnest money) that is forfeited if a party defaults on a contract.

Exclusive Right to Sell

A listing agreement where the broker receives a commission regardless of who finds the buyer.

Exclusive Agency

A listing agreement where the broker only receives a commission if they or another agent find the buyer, not if the seller finds the buyer.

Open Listing

A listing where multiple brokers are hired and only the one who brings the buyer gets paid.

Net Listing

A listing where the seller sets a net price and the broker keeps anything above that as commission; it is illegal in many states.

Option Contract

A unilateral contract until exercised, where a buyer pays an option fee for the right to buy property at a set price later.

Gross Lease

A lease where the tenant pays a flat rent and the landlord covers all expenses.

Net Lease (NNN)

A lease where the tenant pays rent plus some or all expenses, specifically taxes, insurance, and maintenance.

Percentage Lease

A lease common in retail where the tenant pays base rent plus a percentage of sales.

Ground Lease

A long-term lease, often used for land development.

Land Contract

Also known as an Installment Contract or Contract for Deed, where the buyer makes payments directly to the seller and only receives the deed after full payoff.

Equitable Title

The interest held by a buyer under a land contract, while the seller retains legal title until the contract is completed.

Time Is of the Essence

A contract clause stating that all deadlines are strict and missing them constitutes a breach.

As-Is Clause

A clause stating the seller is not required to repair defects but is still legally required to disclose them.

Counteroffer

A response to an offer that automatically terminates the original offer and creates a new one.

Option Fee

A required payment in an option contract; without it, the option is not valid.