1) Bilateral Contract-
Definition: A contract with two or more parties agreeing to exchange promises with each other.
Example: Tom agrees to buy Sue’s house for $200,000. In exchange for $200,000, Sue promises Tom to transfer the title into his name.
a) Contract- Tom and Sue enter a real estate contract with the purchase of a home.
b) Promises- Tom agrees to pay $200,000 in exchange for the title of Sue’s home.
c) 2 or more parties- Tom and Sue are involved in transaction, each making their own promises.
2) Unilateral Contract-
Definition: A contract where one party agrees to do something if another party does something specific. The other party is not obligated to perform any actions.
Example: Ruben signs an open listing agreement with the seller Paul. Paul only has to pay Ruben commission if Ruben brings a buyer to Paul. Ruben has the option to bring Paul a buyer or not. Ruben is not obligated to find one.
a) One party makes a promise- Paul promises to pay Ruben commission.
b) Promise is conditional- Paul will only pay Ruben if Ruben brings Paul a buyer.
c) No promise from second party- Ruben does not promise to bring Paul a buyer.
3) Mental Incompetence-
Definition: When a person is not of sound mind to make or carry out decisions for themselves.
Example: Richard goes to a bar and has 4 drinks before meeting his realtor Ed. Ed sees that Richard is drunk and convinces Richard to make an offer on a house $40,000 over Richard’s budget. The next day Richard looks over the offer and tells Ed he does not want to submit that offer because he was not thinking straight at the time he decided that price.
a) Person not of sound mind- Richard was drunk at the time he made a decision on the price of his offer.
b) Not able to make important decisions- Ed convinced Richard to put an offer on a house $40,000 above his budget.
c) Can’t carry out decisions- Richard was not financially able to carry a mortgage that was $40,000 over his budget.
Definition: A proposal made by a party that another party has to agree to in order for a contract to be made.
Example: Joe told his realtor to ask George, the owner of a home that was for sale, if George would accept $300,000 for his home. George agrees to sell his house to Joe for $300,000 and a contract is formed.
a) A proposal- Joe asks George if he would accept $300,000 for his home.
b) Agreement- George agrees to sell Joe his home for $300,000.
c) Contract- A contract formed because George accepted Joe’s offer of $300,000 for the house.
5) Counter Offer-
Definition: A new offer with different conditions given to a person to reject a previous offer.
Example: Rob offered $240,000 for Gabe’s house. Gabe rejected his offer, but wrote up a new offer for Rob to pay $250,000 for his house.
a) Initial offer- Rob offers Gabe $240,000 for his house.
b) 2nd offer- Gabe counter’s Rob’s offer by asking for $250,000.
c) New terms and conditions- Gabe wants more money for his house than Rob offered.
6) Fraud and Misrepresentation-
Definition: A lie or fib that hides a fact and/or problem in order to gain advantage over another party.
Example: Ron is buying his house from Sarah. Ron asks Sarah if there is a mold problem in the bathroom. Sarah tells Ron that she has never seen mold in the bathroom so Ron will still want to buy the house. Later Ron finds an old receipt for a mold remover specialist that Sarah hired a month before Ron bought the house.
a) A lie or fib- Sarah told Ron that she never saw mold in the bathroom.
b) Hiding a fact or problem- Sarah did not want Ron to know there was a mold problem in the bathroom.
c) Gain advantage- Sarah did not tell Ron about the mold problem because she was afraid Ron might not want the house anymore.
Definition: A provision in an agreement that makes the agreement dependant on the occurrence of a particular instance.
Example: Peter agrees to accept Harold’s offer if Harold pays for the inspections and closing costs. If Harold does not pay for the inspections and closing costs, Peter will not accept his offer.
a) An agreement- Peter agrees to accept Harold’s offer for his house.
b) A provision- Harold must pay for the inspections and closing costs for Peter to accept the offer.
c) Dependence- The agreement will not be valid if Harold does not pay for the inspections and closing costs.
Definition: When the transfer of a party’s contractual rights occurs.
Example: Joe rents a condo to Mark for $900 a month. Mark has the right to live and or rent the property. Mark decides to rent the condo out to Ross for $1100 a month. Mark gives his rights to live in the condo to Ross.
a) Two or more parties- Joe, Mark and Ross are involved in the transferring of rights.
b) Transfer of rights- Joe gives Mark the right to live or rent his condo. Then Mark gives Ross the right to live in the condo.
c) Permission- Mark has the right from Joe to sublet the condo to another person.
9) Liquidated Damages Provisions-
Definition: An agreement between parties to pay a specific sum if there is a problem in the transaction.
Example: Suzy has a closing date of November 13th on Carol’s home. If for some reason the house does not close by November 13th Suzy agrees to pay Carol $30 per day until it does close.
a) An agreement- Suzy is in contract to buy Carol’s home.
b) Agreement of money- Suzy agrees to pay Carol $30 per day if the house does not close by November 13th.
c) Problem in transaction- The money will only be paid if the house does not close by November 13th.
Definition: A court order that makes a party do or not do a particular action.
Example: Tom inherited his home from uncle Bob. Bob wrote in will that Tom may not sell the home for 10 years after Bob passes away. Tom tries to sell the house 3 months after Bob’s death. Bob’s lawyer takes Tom to court for trying to sell the house. The judge orders that Tom must follow what Bob’s will says and he cannot sell the house.
a) A court order- The judge rules Tom must follow what is in Bob’s will.
b) A party can or cannot do a particular action- Tom may not sell Bob’s home for 10 years.
c) Breaking of a contract- The judge stopped Tom from breaking his uncle Bob’s will.