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CONTRACT An agreement between competent legal parties to do some legal act or to refrain from doing some legal act in exchange for consideration. 2010©Cengage Learning. All Rights Reserved.
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Chapter 6Real Estate Contracts
2010©Cengage Learning. All Rights Reserved.
IN THIS CHAPTER
• Common real estate contracts:– listings– purchase agreements– leases, options, mortgages– land contracts
• Basics of contract law.
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CONTRACT
• An agreement between competent legal parties to do some legal act or to refrain from doing some legal act in exchange for consideration.
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Contract Classifications
1. express versus implied2. unilateral versus bilateral3. executory versus executed4. valid, enforceable or unenforceable,
void or voidable
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ESSENTIAL ELEMENTS OF CONTRACTS
1. offer2. acceptance (meeting of the minds)3. consideration4. legal capacity of the parties5. reality of consent6. legality of object7. possibility to complete
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BASIC CONTRACT LAW
• Fraud is intentional deceit or lying, a misstatement of material facts to induce someone to rely on the facts.
• Misrepresentation is the unintentional misstatement of facts.
• Exaggeration of a property’s benefits is puffery.
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BASIC CONTRACT LAW
• A mutual mistake, a mistake of material fact by both parties, may nullify a contract.
• Undue influence is any improper control or influence by one person over another.
• Duress is the threat of violence or placing a person in fear for his or her safety.
• The parties must be able to complete the contract without interference from operation of law or acts of God.
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CONTRACT CONDITIONS
• Condition Precedent• Condition Concurrent• Condition Subsequent
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A condition in a contract, is an act, or event, other than a lapse of time, that affects a duty to render a promised performance.
CONTRACT CONDITIONS
• Express condition may be spelled out clearly or implied by fact.
• Implied condition the parties have implied agreement to the condition.
• Constructive condition the court constructs a condition in the interest of justice.
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STATUTE OF FRAUDS
• Contracts involving the creation of an interest or the conveyance of an interest in real property must be written to be enforceable.
• “Enforceable” means that a party to the contract may ask the court to order that the terms of the contract be carried out.
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Parol Evidence Rule
• Essentially states that oral explanations can support the written words of a contract but cannot contradict them.
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DISCHARGE OF CONTRACTS
• Agreement of the parties• Full performance• Impossibility of performance• Operation of law
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ASSIGNMENT OF CONTRACT RIGHTS
• Either party to a contract may transfer or sell the contract rights unless the contract specifically prohibits such a sale or transfer.
• The transfer or sale of contract rights is called assignment.
• The party assigning or transferring his or her rights is the assignor.
• The party receiving the rights is the assignee.
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• Michigan law has established that a broker may not create a contract starting with a blank piece of paper.
• That is considered the unauthorized practice of law.
• A broker may fill in preprinted forms.• Any ambiguity in the forms or in the
writing will be weighed against the preparer.
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CONTRACT REMEDIES
1. Specific performance2. Rescission3. Compensatory damages4. Liquidated damages
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Commission Entitlement
1. Ready, willing, and able.2. Acceptance.
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Listings
• Open Listing• Exclusive Agency Listing• Exclusive Right-to-Sell Listing• Carryover Provision• Termination• Competitive Market Analysis (CMA)
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SALES CONTRACTS AND PRACTICES
• Buy and Sell Agreement• Land Contract/Contract for Deed• Options• Right of first refusal
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CHAPTER TERMINOLOGY REVIEW
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acceptanceaccord and satisfactionassigneeassignmentassignorbilateral contractbreach of contractbuyer’s contractcarryover provisioncompensatory damagescompetencecomplete performanceconditioncondition concurrentcondition precedentcondition subsequentconditional salescontract
considerationconstructive conditioncontractcontract for deedCounterofferDoctrine of EquitableConversionduressearnest moneyequitable titleestoppelexclusive agency listingexclusive right-to-sell listingexecuted contractexecutory contractexpress conditionexpress contractfraud
more CHAPTER TERMINOLOGY REVIEW
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good considerationimplied contractinstallment land contractland contractlegality of objectliquidated damageslisting contractmergermisrepresentationmutual assentmutual mistakenovationoffer and acceptanceopen listingoperation of lawoptionparol evidence rulepuffingpunitive damagesready, willing, and able
reality of consentRescissionright of first refusalspecific performanceStatute of Fraudstime is of the essenceundue influenceunenforceable contractUniform Vendor and Purchaser’s Risk Actunilateral contractvalid contractvaluable considerationvendeevendorvoid contractvoidable contract
