Texas Contract Law Flashcards

Mandatory TREC Forms

• One to Four Family Residential Contract, Farm and Ranch Contract, Loan Assumption Addendum are required forms.

Seller Disclosure Requirements

• Disclosure of property conditions is mandatory for homes over ten years old and homes valued at $50,000 on land worth $500,000.
• No disclosure is needed for sales by court order, new residences, government agency transactions, or co-owner transfers.

DTPA and Legal Responsibility

• To obtain triple damages under the Deceptive Trade Practices Act (DTPA), plaintiffs must prove the misleading statement was known to be false.
• Sellers must complete the seller's disclosure notice to the best of their belief as per Texas Property Code Section 5.008.

TREC Rule-Making Authority

• The Texas Real Estate Commission (TREC) possesses rule-making power that carries the full force of law.

TREC-Promulgated Contracts

• There are six TREC-promulgated contracts, including the Residential Condominium Contract and others related to property transactions.

Broker-Lawyer Committee Role

• Responsible for drafting and revising real estate contract forms to enable smoother transactions and minimize disputes.

Use of Forms

• Reproduced TREC forms must match the original size, and agents can rely on forms prepared by lawyers or the Broker-Lawyer Committee in the absence of a TREC form.

Seller Disclosure Notice

• Not required for transactions via a court order or fiduciaries managing estates.
• Buyers have seven days post-contract signing to terminate if they receive the Seller's Disclosure of Property Condition late.

Licensee Regulations

• Only licensed attorneys can advise on the validity of title to real property.
• Failure to provide the seller's disclosure may lead to contract termination at the buyer's discretion.

Exemptions and Penalties

• Transactions in which the seller's dwelling value is below 5% of total property value are exempt from disclosure requirements.
• Certain transactions involving government forms don’t necessitate TREC forms.

Committee Composition and Functions

• The Broker-Lawyer Committee consists of six brokers, six lawyers, and one public member, all serving staggered six-year terms.

Buyers' Responsibilities

• Buyers should review the seller's disclosure notice before making an offer to understand property conditions accurately.

Non-Disclosure and Health

• Sellers are not obligated to disclose the health status of previous occupants, such as HIV or AIDS.

Licensee Actions

• A licensee can draft their own contracts if acting as a principal, and can also use forms like a Bill of Sale for personal property transactions.

Agency vs. Principal

• Licensees acting solely as principals in transactions are exempt from using TREC forms, while agents must adhere to regulations.

Commission Leadership

• TREC commissioners are appointed by the governor with senate approval, serving staggered six-year terms.

General Compliance

• All licensed real estate transactions in Texas must comply with the Texas Property Code regarding seller disclosures and contract usage.### Real Estate Terms and Concepts

• A beneficiary under a deed of trust becomes the owner of real property upon sale conducted through a power of sale.

• The Texas Real Estate Commission (TREC) consists of 9 commissioners.

• Assignment refers to the written transfer of interest in a bond, mortgage, or lease.

• In a bilateral contract, both parties have legal obligations (e.g., lease, purchase agreement), while a unilateral contract binds only one party (e.g., option, promissory note).

• Breach of contract is defined as failing to perform a contract’s conditions, like not paying rent or mortgage.

• Consideration is something of value exchanged in a contract, such as property rights for money.

• An express contract is explicitly stated in words (oral or written), whereas an implied contract arises from the involved parties' actions.

• An installment contract allows a buyer to occupy property while making payments, but the seller retains legal title until the final payment is made.

• Liquidated damages are pre-determined amounts specified in the contract as compensation to an injured party upon breach.

• An option is a unilateral agreement allowing one party to decide on a property transaction within a specified timeframe.

• The Statute of Frauds mandates that certain contracts, including deeds and real estate sales, must be in writing to be enforceable.

• The phrase time is of the essence mandates completing actions within specific periods in contracts.

• An unenforceable contract meets valid contract criteria but cannot be legally enforced (e.g., unsigned contracts).

• A void contract lacks legal force due to missing essential elements, whereas a voidable contract allows one or both parties to reject it.

• A contingency is a contract provision requiring a specific act or event to occur before binding the parties.

• A contract is a legally enforceable set of promises that can be either unilateral or bilateral in nature.

• A counteroffer is an alternate offer responding to an original offer, which nullifies the initial offer unless revisited by the original offeror.

• Earnest money is a buyer's deposit showing intention to complete a sale, forfeited upon default but credited upon closing.

• Equitable title refers to a buyer's interest in property through a contract for deed or installment contract, even if legal title is held by the seller.

• An escrow contract outlines responsibilities among the buyer, seller, and escrow holder when earnest money is deposited.

• An executed contract is one where all parties have fulfilled their contractual promises.

• An executory contract involves provisions that are yet to be fully performed.

• A land contract allows the seller to maintain legal ownership until full payment is made by the buyer.

• Novation is the process of replacing a party or obligation in a contract, requiring consent from all original parties.

• Offer and acceptance are crucial components that create a valid contract, often referred to as a meeting of the minds.

• Reality of consent ensures that all parties enter a contract voluntarily and freely.

• Rescission allows a party to cancel a contract, reverting both parties to their conditions before the agreement.

• Suit for specific performance involves a buyer requesting the court compel the seller to complete the sale as agreed.

• A valid contract conforms to all legal requirements, making it binding and enforceable.

• When a contract exchanges a promise for a promise, it is categorized as bilateral.

• After all obligations of a sales contract are met and the transaction is completed, it is termed an executed contract.

• A casual agreement about purchasing real estate that lacks documentation is not considered a contract.

• A contract missing one of its essential elements is deemed void.

• Novation involves the replacement of a contract with a new one.

• The government has the right to take real estate for public use, termed as eminent domain.

• The process of the government acquiring private property for public use is known as condemnation.

• A fee simple estate grants perpetual ownership rights to the property without claims from others.

• A homestead qualifies as a legal life estate, offering protection to the owner.

• A lien is a legal right allowing creditors to secure debts against a debtor's property.

• A sales contract typically does not include a history of previous owners as a detail.

• A sales contract may include lists of personal property to be included with the real estate.

• A complete agreement in a real estate sales contract exists between the buyer and seller.

• After signing a contract, the buyer possesses an equitable title to the property.

• If a sales contract stipulates that an attorney's approval is necessary, it is referred to as a contingency.