Ch. 19- Basic contract law

44 terms by TheLitttleOne 

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Contract

A binding agreement between two or more persons that is enforceable by law.

Assignment

Transfer of rights under a contract.

Breach of contract

Failure of a party to perform obligations under a contract.

Consideration

Given in support of a promise.

Deligation

Transfer of obligations under a contract to another person.

Mutual assent

Meeting of the minds.

Statue of frauds

Law which specifies that certain contracts must be in writing in order to be enforceable.

Valid

Having binding force.

Void

Having no legal force/binding effect

Voidable

Can be voided.

Valid contract

One that is binding and enforceable in a court of law. It has all four of the essential elements.

Voidable contract

- One which is valid and enforceable on its face, but because of some defect, any injured party may void it. A voidable contract is valid until voided (rescinded).

Void contract

An agreement that lacks one or more of the legal essentials. It is not a contract at all; it lacks legal effect.

Unenforceable contract

One that is valid but, for some reason, cannot be proved or sued upon by one or both of the parties.

Executed contract

A contract in which both parties have completely performed.

Implied contract

The agreement is created and shown by acts and conduct rather than words. It is implied through actions.

Express contract

The parties declare the terms and manifest their intentions in words, either oral or written.

Bilateral contract

- A contract in which the promise of one party is given in exchange for the promise of the other party. Both parties are bound to perform. The promises are the consideration for the contract. A promise for a promise.

Unilateral contract

A contract in which a promise is given by one party to persuade the other party to do some action. The second party is not bound to act, but if he does, the first party must keep his promise. A promise for an act.

Illegal contract

One which lacks a lawful object. A contract to break the law.

Invalid contract

A contract that was valid but is no longer valid.

Parole contract

Entirely or partially oral. Some contracts are enforceable even though they are oral.

Novations

refers to substitution of new agreement for the old agreement.
• It can occur when a lender accepts the buyer of a home with an existing mortgage and "substitutes" the new buyer as a replacement for the seller of the home.

Mutual consent

There must be a meeting of the minds. In real estate transactions, this is normally evidenced by an offer by one party and acceptance by the other party. The acceptance must be a mirror image of the offer.
• Offer must be communicated to the offeree and must be definite and certain in its terms. It must be nonillusory in character.
• Acceptance must be communicated in the manner specified by the offer. If no manner is specified, then acceptance may be communicated by any reasonable method. Silence cannot ordinarily be regarded as an acceptance.
• For mutual consent, a three step process must be completed.
o 1.) The offeror makes an offer.
o 2.) The offeree receives and accepts the offer.
o 3.) The offerees acceptance must be communicated back to the offeror.

Actual fraud

Any statement or act, intentionally made or done, with the intent to deceive the other party and to persuade him to enter into a contract. (e.g., Broker tells buyer the sewers are connected when he knows they are not).

Constructive fraud

A breach of duty which, without fraudulent intent, gains an advantage for the person at fault. It is essential that the injured party relied on the misrepresentation. (e.g., Broker tells buyer the taxes are paid, when he really does not know. Broker, being an expert in the field, should know.)

Negative fraud

Concealment/suppression of facts

Mistake

Parties are mistaken or forgetful concerning a material fact. Contract is usually void (e.g., Improvements have been destroyed by fire, and neither party knows it).

Duress

Unlawful constraint upon a person whereby he is forced to act against his will. Contract is voidable by injured party (e.g., Broker holds gun to head of buyer forcing him to sign contract).

Menace

A threat to commit duress. Contract is voidable (e.g., Broker says, If you don't sign, Ill hold a gun to your head.).

Consideration

- Consideration: every contract requires consideration. It may be a promise, money, work, an act of forbearance or a benefit conferred. It cannot be an illegal act or services which have been performed. In a bilateral contract, the promises given can be the consideration. Consideration does not have to be money.
• Good consideration: love and affection.
• Valuable consideration: anything which the parties consider to be of value.

Lawful object

Contract must be legal in formation and operation. The contracts consideration and purpose must be legal.

Interpretation of contracts

language of the contract should be clear and explicit.

Parole evidence rule

- A written contract takes priority over an oral agreement, except when the written contract is incomplete or ambiguous.

Rider

An amendment to a contract.

Waiver

A unilateral act which relinquishes a right in a contract.

Privity

(A relationship to privateness) exists in contractual relationships.

Tender

An offer of money or performance in connection with a contract.

Subrogation

The substitution of another person in place of the creditor.

Sue for specific performance

When dollar damages would not provide an adequate remedy, the court may order the defendant to perform the contract (e.g., The court may order a party to sign a deed).
o a. A broker cannot bring a suit for specific performance against a seller or buyer.

Sue for damages

The damages must be reasonable. Damages which serve to punish are not allowed for a breach of contract.

Liquidated damages clause

A clause in the contract providing the amount of the damages in case one of the parties breaks the contract. Normally used when it would be impractical or extremely difficult to fix the actual damages.

Statue of limitations

Bars any court action seeking relief, if not taken within specified time limits.
• 2 years: oral contract.
• 3 years: encroachment, inverse condemnation.
• 4 years: written contract.
• 10 years: judgment lien.

Laches

Unfair delay in asserting legal rights which will not be excused by the courts. Such rights would then be lost.

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