1. Florida Real Estate Principles, Practices & Law 39th Edition
Unit 11: Real Estate Contracts

2. Contracts in General Promises
A contract defines each of the parties legal obligations and rights

3. Authority of Licensees to Prepare Contracts
Real estate licensees are allowed to assist buyers and sellers with the preparation of four types of contracts
Listing agreement
Buyer brokerage agreement
Sale and purchase contract
Option contract

4. Essential Elements of a Contract
Contractual capacity of the parties (competent)
Voidable by the minor
Offer and acceptance—mutual assent
“Meeting of the minds”
Offeror and offeree
Legality of the object (legal purpose)
Consideration
Valuable
Measured in terms of money
Good
Cannot be measured in terms of money love and affection

5. Statute of Frauds
Requires certain contracts be written and signed by parties to be enforceable (in court)
Purchase and sale contracts
Option contracts
Deeds and mortgages
Lease agreements for more than one year
Listing agreements for more than one year

6. Statute of Limitations
Establishes time period during which a contract is enforceable (in court)
Written contracts: 5 years
Oral contracts (parol): 4 years

7. Elements of a Valid Real Estate Sale Contract
Competent parties
Offer and acceptance (meeting of minds)
Legal purpose
In writing and signed (Statute of Frauds)
Consideration (valuable or good)

8. Void, Voidable, and Unenforceable Contracts
Does not meet all of the required elements of a valid contract and, therefore, has no legal effect
Voidable
A contract in which one party may cause the contract to be voided
Unenforceable
A contract with required elements but will not be enforced in court (does not comply with Statute of Frauds or exceeds time in Statute of Limitations)

9. Contract Classifications
Formal vs. Informal
Formal
Written (historically was under seal)
Informal
Oral (parol contract)
Bilateral vs. Unilateral
Bilateral
Obligates both parties to perform
Unilateral
Obligates only one party

10. Contract Classifications
Express vs. Implied
Express
All of the terms have been conveyed in words and a meeting of the minds is reached
Implied
Not expressed but may reasonably be implied
Executory vs. Executed
Executory
Contract in the process of being carried out
Executed
Contract has been fully carried out

11. Contract Negotiation An offer shows intention to contract Offer
Offeror
Offeree
Counteroffer
Alters the terms of the original offer
Kills original offer and substitutes new offer

12. Ways An Offer Is Terminated
Withdrawal by offeror
Insanity
Lapse of time
Death
Counteroffer
Acceptance
Rejection
Destruction of the property

13. Termination of Contracts
Performance
Mutual rescission (renunciation)
Impossibility of performance
Lapse of time
Breach

14. Remedies for Breach of Contract
Specific performance
Court orders party who committed the breach to perform as stated in the contract
Liquidated damages
If buyer defaults, seller may retain deposits as liquidated damages

15. Remedies for Breach of Contract
Rescission
Cancellation of contract
Parties restored to original position
Compensatory damages
Unliquidated damages
Civil suit for money damages suffered because of breach

16. Assignment and Novation
Assignment occurs when one party transfers rights and duties to another person
Assignor
Assignee
Novation occurs when a new party is substituted for one of the original parties

17. Listing Contracts Agreement between owner and broker
A sales associate’s authority is derived from their broker
Listing contracts may be written, oral, or implied

18. F.S. 475 Written Listing Requirements
Written listing contracts must include
Definite expiration date
Description of the property
Listing price and terms
Broker’s compensation (fee or commission)
Signature(s) of owner(s)
Copy to seller within 24 hours
Automatic renewal clause prohibited

19. Types of Listings Open listing Exclusive-agency listing
One or more brokers, commission to broker who sells the property, usually a unilateral contract
Exclusive-agency listing
One broker, commission to listing broker if not sold directly by owner, usually a bilateral contract
Exclusive-right-of-sale listing
One broker, commission to listing broker no matter who procures the buyer, usually a bilateral contract

20. Types of Listings Net listing
Could be open, exclusive agency, or exclusive right of sale
Broker retains proceeds in excess of seller’s net

21. Multiple Listing Service
Cooperative service between brokers
Listing information may be entered into the service (with owner’s permission)
Participants in the service (even from other brokerage firms)
Show listed properties
If buyer buys, receive part of the commission

22. Buyer Brokerage Agreements
Parties and term of agreement
Characteristics of property desired
Broker’s obligations
Buyer’s obligations
Compensation (including retainer)
Protection period
Early termination
Authorized brokerage relationship

23. Conditions Created by Listing Contracts
Find a Purchaser
Broker must produce a buyer who is ready, willing, and able to purchase at the terms of the listing contract or at other terms the seller accepts
Effect a Sale
Broker must produce a buyer who is ready, willing, and able to purchase at the terms specified or accepted by the seller and must ensure the transaction closes

24. Broker’s Compensation
To be paid, the broker must
Hold a current, active license
Be employed through a listing or buyer broker agreement
Be the procuring cause
Started chain of events that resulted in the sale

25. Option Contracts Unilateral contract Consideration
Optionor (owner) has obligations
Optionee (potential buyer) has right to buy
Consideration
Information required
Options assignable
Licensee requirements
Substantial valuable consideration

26. Sale and Purchase Contracts
Vendor (seller) and vendee (buyer)
Bilateral contract
In writing and signed
(Statute of Frauds)

27. Information in Sale and Purchase Contracts
Names of vendor and vendee
Legal description
Consideration
Total purchase price
Financing or cash terms
Title evidence
Type of deed
Expenses and prorations
Personal property to be included
Closing date, time, place
Date of possession of property

28. Signatures
If property is owned by married couple (tenancy by the entireties), or
If property is a homestead and owned by one spouse only (in severalty)
Both spouses must sign the sale and purchase contract

29. Power to Bind the Seller or Buyer
Broker does not have the authority to sign for or bind the buyer or the seller
Power of attorney
Document designating another as attorney-in-fact

30. Material Defects Disclosure
Sellers of residential property must disclose material defects
Johnson v. Davis
Florida Supreme Court decision
“As is” provision does not circumvent duty to disclose

31. Radon Gas Disclosure
Required radon disclosure statement on sale and lease contracts
Information regarding radon gas
Does not require testing for sale or lease

32. Lead-Based Paint
Residential Lead-based Paint Hazard Reduction Act (federal law)
Applies to housing built prior to 1978

33. Lead-Based Paint Homes built prior to 1978
Sellers/landlords must disclose presence of any known lead-based paint
Contracts/leases must include disclosure about lead-based paint
Buyers and renters must be given an EPA booklet
Sellers must allow buyers to conduct an inspection within 10 days (inspection is not required)
Contractor requirements

34. Energy Efficiency Disclosure
Florida Building Energy-Efficiency Rating Act
Buyers, before signing sale contract, receive an information brochure stating purchaser may get an energy-efficiency rating
Created uniform, statewide energy efficiency rating system

35. Homeowners Association Disclosure
Property subject to mandatory homeowners association
Provide buyers with a disclosure regarding the association, fees, restrictive covenants, and assessments
3-day right of rescission
Cannot be waived
Ends at closing

36. Property Tax Disclosure
Disclosure summary concerning ad valorem taxes before or at the time of execution of a contract for sale
Buyers should not rely on the amount of the seller’s property taxes as an indication of the taxes purchasers will be required to pay in the year following purchase of the property

37. Building Code Violation Disclosure
Seller must disclose
The existence and nature of the violation
Copy of the pleadings, notice, etc.
Buyer will be responsible for compliance with code
Seller must forward name and address of new owner to code enforcement agency within 5 days

38. Community Development District (CDD)
Independent special district
Services the long-term needs of its community
Constructs, operates, and maintains infrastructure and services
Developer finances construction of infrastructure by issuing bonds
Homeowners repay the bonds through tax assessments
Written disclosure in initial contracts for sale

39. Time-Share Resale Listing Agreements
Required disclosure not guaranteeing a sale
Other requirements
Commissions (fees)
Terms
Broker’s services
Termination rights
Judgments (or litigation) against the broker for consumer fraud
Buyer’s right to cancel (10 days)

40. Misrepresentation and Fraud
Misstatement, omission, or concealment of factual matter
Fraud
Licensee made misstatement
Licensee knew statement was not accurate
Party relied on the misstatement
Party was damaged as a result