1. Chapter 6 Real Estate Contracts 2010©Cengage Learning. All Rights Reserved.

2. IN THIS CHAPTER Common real estate contracts: – listings – purchase agreements – leases, options, mortgages – land contracts Basics of contract law. 2010©Cengage Learning. All Rights Reserved.

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. 2010©Cengage Learning. All Rights Reserved.

4. Contract Classifications 1. express versus implied 2. unilateral versus bilateral 3. executory versus executed 4. valid, enforceable or unenforceable, void or voidable 2010©Cengage Learning. All Rights Reserved.

5. ESSENTIAL ELEMENTS OF CONTRACTS 1. offer 2. acceptance (meeting of the minds) 3. consideration 4. legal capacity of the parties 5. reality of consent 6. legality of object 7. possibility to complete 2010©Cengage Learning. All Rights Reserved.

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. 2010©Cengage Learning. All Rights Reserved.

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. 2010©Cengage Learning. All Rights Reserved.

8. CONTRACT CONDITIONS Condition Precedent Condition Concurrent Condition Subsequent 2010©Cengage Learning. All Rights Reserved. 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 or implied by fact. Implied condition the parties have implied agreement to the condition. Constructive condition the court constructs a condition in the interest of justice. 2010©Cengage Learning. All Rights Reserved.

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. 2010©Cengage Learning. All Rights Reserved.

11. Parol Evidence Rule Essentially states that oral explanations can support the written words of a contract but cannot contradict them. 2010©Cengage Learning. All Rights Reserved.

12. DISCHARGE OF CONTRACTS Agreement of the parties Full performance Impossibility of performance Operation of law 2010©Cengage Learning. All Rights Reserved.

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. 2010©Cengage Learning. All Rights Reserved.

14. Michigan law has established that a broker may not create a contract starting with a blank piece of paper. That is 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. 2010©Cengage Learning. All Rights Reserved.

15. CONTRACT REMEDIES 1. Specific performance 2. Rescission 3. Compensatory damages 4. Liquidated damages 2010©Cengage Learning. All Rights Reserved.

16. Commission Entitlement 1. Ready, willing, and able. 2. Acceptance. 2010©Cengage Learning. All Rights Reserved.

17. Listings Open Listing Exclusive Agency Listing Exclusive Right-to-Sell Listing Carryover Provision Termination Competitive Market Analysis (CMA) 2010©Cengage Learning. All Rights Reserved.

18. SALES CONTRACTS AND PRACTICES Buy and Sell Agreement Land Contract/Contract for Deed Options Right of first refusal 2010©Cengage Learning. All Rights Reserved.

19. CHAPTER TERMINOLOGY REVIEW 2010©Cengage Learning. All Rights Reserved.  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 2010©Cengage Learning. All Rights Reserved.  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