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Contracts
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NATURE AND CLASSIFICATION OF CONTRACTS
 Contracts requires an exchange of promises or acts, supported by consideration, and made by competent parties.
 The exchange of promises or acts is by itself insufficient & no contract is created.
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Bilateral and Unilateral Contracts
 In a bilateral contract each side exchanges a promise for the other side’s promise.
 In a unilateral contract one side exchanges a promise for an act.
 Real estate contracts are bilateral.
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Options
 an offer to sell property to another for a specified price and at set terms for a specific period.
 This is an unilateral contract, because the buyer has no obligation to complete the purchase.
 An option is supported by consideration.
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Express and Implied Contracts
 Express contracts exist when the contract’s terms are stated in words, either oral or written.
 Real estate contracts are express, and because of the statute of frauds , most real estate agreements (except leases for periods of one year or less) must be in writing to be enforceable.
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Express and Implied Contracts
 Implied contracts arise solely from the acts of the parties.
 The terms of the contracts are inferred from the parties’ conduct, because no actual terms have been spoken.
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Executed and Executory Contracts
 An executed contract is one that has been fully performed by both parties.
 An executory contract is one in which something remains to be done.
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Validity
 Valid Contract
 Void Contract
 Voidable Contract
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Unenforceable Contract
 One that appears valid but is not enforceable by the courts.
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Illusory Contracts
 One that appears to be a contract but does not bind both parties.
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CONTRACT ELEMENTS
 Mutual Assent
 Offer
 Acceptance
 Consideration
 Legal Object
 Competent Parties
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 An offer may be withdrawn anytime prior to acceptance.
 Once a party decides to accept offer, this acceptance must be communicated in the appropriate manner.
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Statute of Frauds
 Requires certain contracts to be in writing & executed by all parties to be valid.
 Real estate contracts that must be in writing including leases & other contracts that cannot be performed within one year.
 Without a written agreement the broker may not recover a commission.
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DISCHARGE AND
UNENFORCEABILITY
OF CONTRACTS
 Modification
 Rescission
 Novation
 Accord and Satisfaction
 Cancellation
 Statute of Frauds
 Bankruptcy
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BREACH
 An unjustified failure to perform by one party.
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BREACH REMEDIES
 Damages
 Specific Performance
 Rescission
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LIQUIDATED DAMAGES o
An amount of money both parties agree to at the time that the contract is made that shall be paid in the event one party breaches the contract.
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GENERAL DAMAGES
 Minimal Damages
 General Damages
 Special Damages
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