contracts - donald free school of real...

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Contracts

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Contracts can be created orally.

Classifying Contracts

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Contracts can be created in writing.


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The Statute of Frauds states that most real estate contracts must be in writing to be enforceable.


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Express Contracts are clearly communicated. Implied Contracts are created by your actions.


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Classifying Contracts Valid Contract

Contains all the essential legal elements.

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Essential Elements of a Contract A contract cannot live without: •  Consideration •  Assent (Mutual &

Genuine) •  Legal Capacity •  Legal Purpose


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Classifying Contracts Void Contract

At least one of the essential elements is missing.

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Classifying Contracts Void Contract

Is NOT a contract.

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Voidable Contract All essential elements are present BUT one or more may be removed.


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Voidable Contract Only the person acting under the disability may choose to rescind.


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Voidable Contract Unless it is rescinded it is a valid contract.


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Enforceable Contract Parties may be forced to perform according to contract terms.


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Unenforceable Contract A contract of this type is one that cannot be enforced by either party in a court of law.


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Unenforceable Contract The time for filing has passed according to the Statute of Limitations.


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Unenforceable Contract Certain verbal contracts are unenforceable under the Statute of Frauds.


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Classifying Contracts Executory Contract Is one in which one or both parties have not yet performed.

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Classifying Contracts Executed Contract

Is one in which all parties have performed all the provisions of the contract.

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Classifying Contracts Bilateral Contract

Is one in which both parties make promises and therefore incur obligations.

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Classifying Contracts Unilateral Contract

Is one in which only one party is making a promise for the action of another.

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Essential Elements of a Contract Competent Parties

Minors - A contract signed by a minor is voidable at the minor’s option.

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Minors - The contract can be voided any time up to the age of majority, and a reasonable length of time thereafter.

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A contract signed by a party who has been declared legally incompetent is void.

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Competent Parties A contract signed by a party who was under the influence of alcohol or drugs is voidable.

Essential Elements of a Contract

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The person who authorizes another person to act on their behalf is the principal.

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The person who acts on behalf of another person is an attorney-in-fact.

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The authorization is called a power of attorney.

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Corporation - A legal entity which can enter into a contract.

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Corporation - A corporate resolution signed by the board of directors authorizes certain officers to sign and bind the corporation.

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Essential Elements of a Contract Court Appointees

Administrators, trustees or guardians receive the authority to sign contracts from the court.

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Essential Elements of a Contract Mutual Ascent

There must be a meeting of the minds on every detail of the contract.

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Meeting of the Minds

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Buyer Offeror Seller Offeree

Acceptance

Offer

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$190,000

NO!

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$200,000

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$195,000

NO!

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Acceptance

$195,000

YES!

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Essential Elements of a Contract Mutual Assent

A person making an offer may withdraw the offer at any time prior to being notified that their offer has been accepted.

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There is no contract if the time limit for acceptance of the offer has expired.

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There is no contract if either party dies before a final agreement can be reached.

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There is no contract if the house burns down before a final agreement is reached.

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Contract is created only when notice is actually received by the offeror or their agent.

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Constructive Communication - The contract is created when the message is sent, not when it is received.

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If the contract does not detail the means of acceptable notice, respond with the same method of communication as the offer.

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Essential Elements of a Contract Genuine Assent

The parties to the agreement have acted of their own free will.

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Essential Elements of a Contract Innocent Misrepresentation

Misstatements of fact made without any intention to deceive another person.

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Essential Elements of a Contract Innocent Misrepresentation

If the matter is of material value, and the other party relied on it, the contract is voidable.

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Essential Elements of a Contract Actual Fraud

A deliberate and malicious misrepresentation of a material fact.

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Essential Elements of a Contract Actual Fraud

The contract is voidable by the injured party.

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Essential Elements of a Contract Negative Fraud

Is concealment of important information.

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Essential Elements of a Contract Negative Fraud


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Essential Elements of a Contract Constructive Fraud

Occurs when material facts are misrepresented with no intent to deceive or mislead the other party.

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Constructive Fraud The act is also called negligent misrepresentation.


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Essential Elements of a Contract Constructive Fraud


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Essential Elements of a Contract Mutual Mistake

Occurs if both parties to a contract are mistaken about certain facts vital to a contract.

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Essential Elements of a Contract Mutual Mistake

There is no mutual assent, and the contract is void.

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Essential Elements of a Contract Menace

Occurs when someone has been coerced into signing by a threat of force.

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Essential Elements of a Contract Duress

Occurs when someone has been forced to sign a contract.

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Essential Elements of a Contract Menace or Duress

A contract signed under menace or duress is voidable by the injured party.

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Essential Elements of a Contract Undue Influence

When someone is influenced to sign a contract by another due to a relationship of trust and confidence.

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Essential Elements of a Contract Undue Influence


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Essential Elements of a Contract Valuable Consideration

Is money or its equivalent.

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Good Consideration Is for “love and affection”.


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Essential Elements of a Contract Legal Purpose

If the purpose of the contract is illegal, in whole or in part, the contract is void.

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Essential Elements of a Contract Statute of Frauds

Requires certain contracts to be in writing and signed in order to be enforceable.

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It Includes all contracts for the sale of an interest in real property.

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It Includes all contracts that cannot be performed in one year and for personal property valued over $500.

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Essential Elements of a Contract Parole Evidence Rule

Relates to the fact that written agreements always take precedence over oral agreements.

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Discharge of Contractual Obligations Performance Executory Contract A contract in which all of the terms have not yet been performed.

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Discharge of Contractual Obligations Performance Executed Contract Is a contract in which all of the terms have been performed.

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Discharge of Contractual Obligations Performance - Time is of the Essence Means that all time limits in the contract must be strictly observed.

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Discharge of Contractual Obligations Supervening Illegality

When a change in the law makes the obligations under the contract legally impossible to perform.

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Discharge of Contractual Obligations Mutual Agreement

All parties to the contract mutually agree to cancel the contract.

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Discharge of Contractual Obligations Novation

The substitution of a new obligation or a new party.

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Discharge of Contractual Obligations Destruction of the Property A contract may give either party the option of canceling the contract if the property is destroyed.

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Discharge of Contractual Obligations Operation of Law

Applies to voidable contracts.

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Discharge of Contractual Obligations Assignment of Contract

The transfer of one’s rights and obligations under a contract. The assigning party retains ultimate liability.

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Discharge of Contractual Obligations Assignment of Contract

Permitted unless specifically restricted in the contract.

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Remedies for Breach of Contract Contractual Remedies

Mediation - An independent third party works with the disputing parties to help them resolve their differences.

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Mediation - If the mediation is not successful the parties can then seek other methods of resolution.

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Arbitration - A disinterested party hears both sides of the dispute and makes a decision as to how it must be resolved.

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Arbitration - The parties are bound by the decision.

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Liquidated Damages - The amount of money the injured party is entitled to receive if the other party is in default.

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Remedies for Breach of Contract Remedies Provided by Law Damages - The innocent party may sue the defaulting party for money damages.

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Remedies for Breach of Contract Remedies Provided by Law Specific Performance - The innocent party may seek a court order requiring the defaulting party to carry out the terms and provisions of the contract.

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Remedies for Breach of Contract Remedies Provided by Law Rescission - If there is a unilateral rescission of the contract, the injured party is entitled to the return of any payments they have made.

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Defines the time within which an injured party has the right to seek a legal remedy.

Statute of Limitations

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Real Estate Contracts

Listing Contracts Serve as the broker’s contract of employment.

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Real Estate Contracts Listing Contracts

Is an agency agreements wherein the principal (seller) authorizes the agent (broker) to market the property.

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Real Estate Contracts

Sales Contracts Once it is signed, the seller is committed to sell and the buyer to buy.

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Real Estate Contracts Option Contracts are unilateral contracts

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Real Estate Contracts Option Contracts

Owner agrees to sell or lease for a certain price within a certain period of time

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Real Estate Contracts Leases

The lessor conveys to the lessee the right of possession and control for a specified period of time.

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Real Estate Contracts Property Management Contract

An agency contract in which the principal (owner) authorizes the agent (broker) to manage the property.

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Real Estate Contracts Affiliation Agreement

Is signed when a salesperson or associate broker joins a brokerage firm.

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Indicates if salesperson or associate broker be treated as an employee or independent contractor.

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Must include how broker will compensate the agent.

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Real Estate Contracts Land Contract

The seller holds title until the contract has been satisfied.

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The buyer has equitable title.

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In order to insure good title to the buyer, the deed is signed and placed with an escrow agent.

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Closing the Transaction The procedure of finalizing the contract.

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Closing the Transaction Closing In Escrow

Doctrine of Relation Back - Conveyance is effective as of the date the deed in place with escrow agent.

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Closing the Transaction

Closings in Georgia are performed by an attorney who represents the lender.

contracts - donald free school of real...

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