Chapter 6
Real Estate
Contracts
© 2015 OnCourse Learning
IN THIS CHAPTER
• Common real estate contracts:
– Listings
– Purchase agreements
– Leases
– Options,
– Mortgages
– Land contracts
• Basics of contract law.
CONTRACT
• An agreement between competent legal
parties to do some legal act or to refrain
from doing some legal act in exchange
for consideration.
Contract Classifications
1. Express versus implied
2. Unilateral versus bilateral
3. Executory versus executed
4. Valid, enforceable or
unenforceable, void or voidable
ESSENTIAL ELEMENTS OF CONTRACTS
1. Offer
2. Acceptance
3. Notification of acceptance
4. Consideration
5. Legal capacity of the parties
6. Reality of consent
7. Legality of object
8. Possibility to complete
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.
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.
CONTRACT CONDITIONS
• Condition Precedent
• Condition Concurrent
• Condition Subsequent
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 in writing or orally.
• Implied condition the parties have
implied agreement to the condition.
• Constructive condition the court
constructs a condition in the interest of
justice.
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.
Parol Evidence Rule
• Essentially states that oral explanations
can support the written words of a
contract but cannot contradict them.
DISCHARGE OF CONTRACTS
•
•
•
•
Agreement of the parties
Full performance
Impossibility of performance
Operation of law
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.
• Michigan law has established that a
broker may not create a contract
starting with a blank piece of paper.
• This would be 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.
CONTRACT REMEDIES
1. Specific performance
2. Rescission
3. Compensatory damages
4. Liquidated damages
Commission Entitlement
1. Ready, willing, and able.
2. Full price and terms.
Listings
•
•
•
•
•
Open Listing
Exclusive Agency Listing
Exclusive Right-to-Sell Listing
Carryover Provision
Termination
SALES CONTRACTS AND PRACTICES
•
•
•
•
Buy and Sell Agreement
Land Contract/Contract for Deed
Options
Right of first refusal
CHAPTER TERMINOLOGY REVIEW
acceptance
accord and satisfaction
assignee
assignment
assignor
bilateral contract
breach of contract
buyer’s contract
carryover provision
compensatory damages
competence
complete performance
condition
condition concurrent
condition precedent
condition subsequent
conditional sales
contract
consideration
constructive condition
contract
contract for deed
Counteroffer
Doctrine of Equitable
Conversion
duress
earnest money
equitable title
estoppel
exclusive agency listing
exclusive right-to-sell listing
executed contract
executory contract
express condition
express contract
fraud
more CHAPTER TERMINOLOGY REVIEW
good consideration
reality of consent
implied contract
Rescission
installment land contract right of first refusal
land contract
specific performance
legality of object
Statute of Frauds
liquidated damages
time is of the essence
listing contract
undue influence
merger
unenforceable contract
misrepresentation
Uniform Vendor and Purchaser’s Risk Act
mutual assent
unilateral contract
mutual mistake
valid contract
novation
valuable consideration
offer and acceptance
vendee
open listing
vendor
operation of law
void contract
option
voidable contract
parol evidence rule
puffing
punitive damages
ready, willing, and able