Texas Pre-license Promulgated Contracts Study Guide

Flashcards covering key vocabulary, legal terms, and contract elements from the Texas Pre-license Promulgated Contracts Study Guide.

contract

A legally binding and enforceable agreement to do or not to do a specific thing.

promulgated contracts

Contracts prepared and authorized by the Texas Real Estate Commission (TREC) that must be used by real estate license holders, with limited exceptions.

legally competent

When a party can legally sign a binding contract because they have reached the age of majority (usually 18) and have not been declared mentally incompetent by a judge.

mutual agreement

Also known as mutual assent or a 'meeting of the minds,' where all parties to a contract agree on all terms and conditions.

consideration

Something of value exchanged by the parties as evidence of agreement; in real estate contracts, the exchange of promises acts as consideration.

statute of frauds

A law requiring that specific contracts, such as real estate sales and listing agreements, be in writing and signed by all parties to be enforceable.

parol evidence rule

A rule preventing a party to a written contract from presenting additional evidence of past agreements to add to or vary the written terms.

void contract

A contract lacking legal or binding force; it often contains illegal conduct or lacks essential elements.

voidable contract

A contract where one party (such as a minor or victim of duress) has the option to perform, enforce, or void the agreement.

unenforceable contract

A contract that cannot be enforced by courts because of reasons like the statute of limitations, a change in law, or the doctrine of laches.

executory contract

A contract that has not yet been fully performed or is in the process of being carried out by the parties involved.

executed contract

A pre-existing contract in which all material terms have been fulfilled by all parties, leading to the closing of the transaction.

bilateral contract

A contract wherein both parties are obligated to perform in an exchange of promises.

unilateral contract

A contract where only one party makes a promise and is obligated to perform if a second party chooses to accept the offer (e.g., an option contract).

reasonable time

A flexible concept describing dates and deadlines that can change slightly if circumstances demand it, provided they are not delayed beyond what an average person would consider acceptable.

time is of the essence

A phrase indicating that failure to act within a specified time required (such as an option period deadline) would equal a breach of contract.

addenda

Materials added to and included in the initial contract before it is signed that provide supplementary information about the transaction.

amendment

A modification to a contract made using a TREC-promulgated form after the contract has already been fully signed and agreed upon.

performance

The fulfillment of an obligation, duty, or contract, typically requiring specific action to achieve a specific result.

assignment

The transfer of contractual rights and duties to a third party, where the original party remains secondarily liable unless expressly released.

novation

A mutual agreement by the parties to substitute a brand new contract for an existing one, relieving the original party of liability.

statute of limitations

A state or federal law establishing a time limit for bringing specific legal actions or civil suits.

doctrine of laches

A legal common law concept where a judge determines if a plaintiff provided an 'undue delay in seeking relief' to bar a claim.

Broker-Lawyer Committee

A 13-person advisory committee comprised of six brokers, six lawyers, and one public member who draft and revise contract forms.

offer

A promise made by one party requesting something in exchange, which becomes a binding contract upon acceptance.

counteroffer

A contract proposal submitted in response to a previous offer that modifies terms; it is legally considered a rejection of the original offer.

effective date

The date a contract becomes binding between parties, determined by the final date of acceptance when communication of the signed agreement occurs.

One to Four Family Residential Contract (Resale)

A popular TREC-promulgated contract used primarily for reselling existing homes for up to four families.

earnest money

Funds paid by the buyer to commit to a contract, typically held in escrow by a third party like a title company.

option fee

A non-refundable payment a buyer makes to the seller for the unrestricted right to terminate the sales contract within a specified option period.

title policy

An insurance policy that protects homeowners or lenders against financial losses from title issues like encumbrances, liens, or defects; also known as title insurance.

mortgagee title policy

A title insurance policy that specifically protects the lender's interests in the property; also known as a loan policy.

restrictive covenant

A provision in a deed that limits the use of the property and prohibits certain specific uses.

survey

The process and physical product of finding and measuring the boundaries of real estate, showing improvements, encroachments, and easements.

Residential Real Property Affidavit (T-47)

A form provided by the seller to assure the buyer that boundaries have not changed since the date of an existing survey was performed.

residential service contract

A policy, often called a home warranty, that insures items such as the heater, air conditioner, and large kitchen appliances for a term, usually one year.

possession upon closing and funding

A term indicating the buyer receives the property keys once the transaction is finalized and the money is transferred.

tenancy at sufferance

A relationship established if a buyer moves in before closing or a seller stays after closing without a written lease.

prorations

The proportional division of expenses, such as property taxes or maintenance fees, between the buyer and seller through the date of closing.

casualty loss

Significant property damage caused by a sudden, unexpected event such as a fire, flood, storm, or earthquake.

liquidated damages

An agreed-upon sum, typically the earnest money, that the seller accepts as a remedy if the buyer defaults on the contract.

escrow

A process in which funds or financial documents are held by an impartial third party on behalf of the others until conditions are met.

rollback taxes

Taxes that may be assessed if the zoning or usage of a property (e.g., from agricultural to residential) changes when it is sold.

short sale

A transaction where a property sells for less than the seller owes on their mortgage, requiring approval from the lender.

Fair Housing Act

A federal law prohibiting housing discrimination based on race, color, religion, national origin, sex, disability, and familial status.

occupancy standards

Rules setting the maximum number of people allowed to live together in a single dwelling, often based on square footage or bedroom count.