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Flashcards in Contracts and Agency Deck (54)
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1

Expressed Contract

The parties state the terms and show their intentions in words May be oral or
written

2

Implied Contract

The agreement of the parties is demonstrated by their actions or conduct and words.

3

Bilateral Contract

Both parties to the contract must promise to do something. A sales contract is a
bilateral contract because both the buyer and seller make a promise. The buyer promises to buy and
the seller promises to sell. One promise is given in exchange for another

4

Unilateral Contract

A one-sided agreement. Only one party makes a promise. The second party
does not have to act, but if they do, the first party must keep the promise. If you offer a reward for a
lost pet and someone brings the pet home you must pay the reward. An option contract is also a
unilateral contract.

5

Executory Contract

The contract is not executed. Something remains to be done by one or both parties.

6

Lis Pendens

A recorded document that creates constructive notice that a legal action relating to a
specific property is being filed in a court. Latin for “litigation pending”. It is a means of clouding a title
to prevent a transfer prior to a lawsuit being filed and a writ of attachment obtained.

7

Writ of Attachment

When the court takes jurisdiction over a defendant’s property till a lawsuit can besettled.

8

Void Contract

Has no legal force or effect because it does not meet the essential elements of a
contract. Contracts executed by a person who has been judged or adjudicated incompetent by a court
have lost their ability to contract. Any document they sign such as a deed or will is void. A contract
conveying property to a fictitious person or company is void

9

Voidable Contract

A valid contract that may be terminated or rescinded by one of the parties.
Example: A contract entered into with a minor or one in which fraud or duress can be proven is
usually voidable. An option contract is also a voidable contract if the party who has the option
terminates the agreement within a prescribed time frame.

10

Unenforceable Contract

An oral contract.

11

Essential Elements of a Valid Contract

- Competent Parties (Legal entities—legal age and mentally competent)
- Offer and Acceptance (Also called “mutual assent” meaning a “meeting of the minds”.)
- Consideration (Consideration is something of legal value, usually one party suffering a legal
detriment, bargained for and given in exchange for a promise or an act. Any return promise to
perform that has been bargained for and exchanged is legally sufficient to satisfy the consideration
element.)
- Legality of Object (It is for a legal purpose or not against public policy.)
- Reduced to Writing and Signed (Enforceable when in writing and agreed to by signature of all the
parties.)

12

Time is of the Essence

The contract must be performed within the time limits specified and that any
party who has not performed on time is liable for breach of contract.

13

Computing Time

The act occurs on day zero. Day one starts on the next day after the act. The
last day of the count ends at midnight on the last day of the period. Calendar days, not business
days, are used.

14

Assignment of a Contract

Transfer of the rights and/or duties from one principal to another.

15

Novation

Substitution of a new contract for an existing agreement with the intent of getting rid of
the old contract or substituting one party for another.

16

Reformation

At some point during the contract one party may realize that a mistake has been made
in the contract terms are that certain information should be made a part of the contract. If this occurs
it may be possible to bring about a reformation of the contract

17

Discharge of Contract

- When completely performed, with all the terms carried out.
- Partial performance of the terms along with a written acceptance
- Substantial performance, in which one party has substantially performed but all the details have not
been performed exactly as the contract requires.
- Impossibility of performance, it is illegal to perform the act required by the contract
- Mutual agreement of the parties to cancel
- Operation of law, as in the voiding of a contract by a minor, or as a result of fraud or duress.

18

Default

A breach of contract is a violation of any of the terms or conditions of a contract without legal
excuse.
- If the seller defaults, the buyer has three alternatives:
Rescind, or cancel the contract and recover the earnest money as liquidated damages. File a court suit for specific performance to force the seller to perform the
contract. Sue the seller for compensatory damages.
- If the buyer defaults, the seller has four alternatives:
Declare the contract forfeited. Retain the earnest money.
Rescind the contract (terminate). Return the earnest money. (Probably not going to happen) Sue for specific performance. Sue the buyer for compensatory damages.

19

Law of Agency

A body of laws that govern the relationship between a principal and his/her agent. It
defines the rights and duties of the parties in a real estate transaction. These laws are based on
common law.

20

Definition

Agency is the relationship between a principal and an agent who acts for the principal within
the specified authority granted by the principal. The principal is entitled to rely on the agent, who places
the principal’s interests above those of his own

21

Single Agency

The practice of representing either the buyer or the seller, but never both in the same transaction.

22

Dual Agency

The practice of representing both the buyer and the seller in the same
transaction. Discouraged in many states

23

Special Agents

Real estate agents generally are appointed “special” agents to buyers and sellers

24

General Agents

Property managers are generally called “general” agents

25

Universal Agents

“Universal” agent – can conduct all business
the owner himself can conduct. Real estate agents do no act as universal agents for their clients.

26

Expressed Agency

An agency created by specific agreement, whether written or oral, between
principal and agent. Those specific agreements are the listing agreement and the buyer
representation agreement.

27

Implied Agency

An agency created by conduct, words, and acts of the agent. It is not an expressed
agency (in writing), but leaves the assumption is that the agent is working for the principal.

28

Ostensible Agency

An agency created when a principal gives a third party reason to believe that
another person is his agent. Think of ostensible as meaning “for all appearances”.

29

Agency by Ratification

An agency relationship that is established after the fact.

30

Gratuitous Agency

This type of agency can be created when an agent offers free advice usually to
friends or family. If the person acts on that advice and is damaged, the agent could be liable.