Contract Law Essentials

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Questions and Answers

What characteristics define a valid contract?

It is invalid from the start.

It possesses the essential elements to be legally enforceable. (correct)

It lacks legal force but is potentially valid.

It can be canceled by one party.

Which legal status of a contract is considered invalid from its inception?

Unenforceable

Void (correct)

Voidable

Enforceable

What does an unenforceable contract imply?

It is valid and must be enforced in court.

It is void and has no legal standing.

It is a valid contract that cannot be enforced. (correct)

It is never valid under any circumstances.

What example is used to illustrate an implied contract?

Ordering food at a restaurant. Signup and view all the answers

What is a fundamental aspect of implied contracts?

They can arise from actions rather than explicit discussions. Signup and view all the answers

What happens if a passenger fails to pay a cab driver after their ride?

The passenger commits a crime and faces penalties. Signup and view all the answers

What distinguishes a voidable contract from a void contract?

A voidable contract can be rescinded by one party. Signup and view all the answers

Which legal status indicates a contract that is potentially valid but lacks legal force?

Unenforceable Signup and view all the answers

What happens to an executed contract once all parties have fulfilled their obligations?

It ceases to exist and has no further legal power. Signup and view all the answers

Which of the following qualifies as an executory contract?

A signed agreement where one party has yet to perform. Signup and view all the answers

What is a significant factor in determining breach of contract for an executory contract?

The material completion of the contract. Signup and view all the answers

Which of the following would represent an ongoing executory contract without an end date?

A rental lease with periodic payments. Signup and view all the answers

In what circumstances can an oral real estate agreement be considered enforceable?

It cannot be enforceable under any circumstances. Signup and view all the answers

Which of the following statements is true about the term 'executed' in contract discussions?

It refers to the process of signing a contract. Signup and view all the answers

What is one key characteristic of an executory contract?

It involves one or more parties yet to perform their obligations. Signup and view all the answers

Which of the following examples represents an executory contract with a defined end date?

A car lease agreement. Signup and view all the answers

What is an express contract?

A contract where terms are explicitly stated. Signup and view all the answers

Which scenario exemplifies a unilateral contract?

A reward offered for the return of a lost pet. Signup and view all the answers

What distinguishes an express contract from an implied contract?

Express contracts explicitly state intentions and expectations. Signup and view all the answers

Which of the following is an example of a unilateral contract?

A reward offer for a lost pet. Signup and view all the answers

What is a primary characteristic of a bilateral contract?

Both parties are legally obligated to fulfill terms. Signup and view all the answers

Why are express contracts considered best practice for real estate professionals?

They prevent misunderstandings and litigation. Signup and view all the answers

In what scenario would an executed contract apply?

When all terms have been completed by both parties. Signup and view all the answers

What consequence can arise from relying on implied contracts in real estate?

Potential for misunderstandings and complaints. Signup and view all the answers

Which of the following best describes a unilateral contract?

Only one party has a responsibility to perform. Signup and view all the answers

Which is NOT a recommended practice when engaging in contracts in real estate?

Assuming agreements based on implied contracts. Signup and view all the answers

What does the term 'bilateral contract' refer to?

An agreement where both parties provide promises. Signup and view all the answers

What is a disadvantage of implied contracts?

They can cause confusion and disputes. Signup and view all the answers

How does an express contract benefit the parties involved?

It provides a clear reference for terms and obligations. Signup and view all the answers

What is typically required for a sales contract involving real property?

Written documentation as per the statute of frauds. Signup and view all the answers

What is a common example of an express contract in real estate?

A buyer representation agreement. Signup and view all the answers

Study Notes

Contract Legal Status

Valid Contract: Possesses the essential elements for legal enforcement.
Unenforceable Contract: Potentially valid, but lacks legal force.
Void Contract: Invalid from inception, lacks legal effect.
Voidable Contract: Potentially valid, but one or more parties can rescind.

Implied Contracts

Established by actions, not written documents or explicit discussions.
Legally binding like explicit contracts.
Common examples:
- Doctor Visit: Patient owes payment for services.
- Restaurant Meal: Customer pays for consumption.
- Taxi Ride: Passenger pays for transportation.
- Barber Shop: Customer pays for services.
Social conventions play a crucial role.
Professionals spell out implied contract terms to avoid misunderstandings (e.g., posted rates for taxis and restaurant menus).
Real estate license holders should avoid implied contracts to prevent confusion and potential litigation; instead favor formal written contracts.

Express Contracts

Explicitly stated intentions and expectations of the parties.
All terms and conditions are identified and agreed upon.
Opposite of implied contracts (inferred from actions).
Common in real estate: listing agreements, buyer representation agreements, sales contracts, lease agreements.
Easier to seek damages if a party fails to perform.
Written form is crucial for dispute resolution and prevention.

Bilateral Contracts

Both parties make promises to perform actions.
Creates reciprocal obligations for both parties.
Common in business.
Example: Anna contracts with Brandon's Bulldogs for a puppy. Both parties make promises as to what they will do.

Unilateral Contracts

One party (offeror) makes a promise in exchange for a reciprocal act by another party.
Second party (offeree) is NOT obligated but has the option to accept.
Two parties, but one promise.
Offeror is obligated once offeree accepts.
Lack mutuality.
Example: Seth Bullock's bounty poster for a criminal (the government made a promise, but citizens were not obligated until they chose to act).

Executed Contracts

All terms have been fulfilled by all parties.
Ceases to exist after fulfillment of promises.
No further legal power to bind parties.
Example: Amy pays Shelly for a sweater.

Executory Contracts

Not fully performed.
Identifies a contract's stage of existence.
Usually aims to be fully executed.
Two elements:
- Binding contract.
- One or more parties have yet to perform.
Executory and Courts: Courts are less inclined to entertain arguments about breach of contract if a contract isn't materially complete.
Ongoing contracts: (exception to the above). Courts will consider ongoing contract failures at any time.
Ongoing contract examples: Rental lease (periodic payment), equipment lease (rent), rent-to-buy lease, car lease.
Oral real estate agreements: Not considered executory since they are not legally binding in the real estate realm (per statute of frauds).
Execution confusion: Saying "executed a contract" often means only that the contract was signed, not that it's completed.

Contract Classifications

Express: Explicit terms and conditions.
Implied: Created by actions.
Unilateral: One party makes a promise.
Bilateral: Exchange of promises from both sides.
Executory: Not fully performed.
Executed: Fully performed.

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Description

Explore the different types of contracts, including valid, unenforceable, void, and voidable contracts. Learn about implied contracts and their significance in everyday transactions, such as doctor visits and restaurant meals. This quiz will enhance your understanding of legal contract principles and their applications.