1. © 2015 OnCourse Learning Chapter 6 Real Estate Contracts

2. IN THIS CHAPTER Common real estate contracts: – Listings – Purchase agreements – Leases – Options, – Mortgages – Land contracts Basics of contract law.

3. CONTRACT An agreement between competent legal parties to do some legal act or to refrain from doing some legal act in exchange for consideration.

4. Contract Classifications 1. Express versus implied 2. Unilateral versus bilateral 3. Executory versus executed 4. Valid, enforceable or unenforceable, void or voidable

5. 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

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. Parol Evidence Rule Essentially states that oral explanations can support the written words of a contract but cannot contradict them.

12. DISCHARGE OF CONTRACTS Agreement of the parties Full performance Impossibility of performance Operation of law

13. 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.

14. 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.

15. CONTRACT REMEDIES 1. Specific performance 2. Rescission 3. Compensatory damages 4. Liquidated damages

16. Commission Entitlement 1. Ready, willing, and able. 2. Full price and terms.

17. Listings Open Listing Exclusive Agency Listing Exclusive Right-to-Sell Listing Carryover Provision Termination

18. SALES CONTRACTS AND PRACTICES Buy and Sell Agreement Land Contract/Contract for Deed Options Right of first refusal

19. 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

20. more CHAPTER TERMINOLOGY REVIEW  good consideration  implied contract  installment land contract  land contract  legality of object  liquidated damages  listing contract  merger  misrepresentation  mutual assent  mutual mistake  novation  offer and acceptance  open listing  operation of law  option  parol evidence rule  puffing  punitive damages  ready, willing, and able  reality of consent  Rescission  right of first refusal  specific performance  Statute of Frauds  time is of the essence  undue influence  unenforceable contract  Uniform Vendor and Purchaser’s Risk Act  unilateral contract  valid contract  valuable consideration  vendee  vendor  void contract  voidable contract