Glossary of Terms
Throughout this unit we've learned a lot of real estate and legal terminology. Below are some of the more important definitions:
Assignment - an assignment of a contract is when the interests of the original party (the assignor) are transferred to another party (the assignee). In general, an assignment will generally be permitted unless there is an express prohibition against assignment in the contract. The new party, (the assignee) assumes primary responsibility for the performance of the contract and the original party (the assignor) incurs secondary responsibility for the contract.
Bilateral contract - when each party offers consideration. In such a contract, a promise is exchanged for a promise, and both parties are equally obligated to perform.
Breach of contract - is when one or both of the parties fails to perform according to the terms and conditions of the contract
Buyer's Agency Agreement- states that the broker represents the buyer and that the buyer has an obligation to that agent for commission during term of the agreement. This agreement is unilaterally cancelable by either party and must be done in writing.
Buyer's Agreement No Agency - this contract states the broker does not represent the buyer, even though they may be performing brokerage services for the buyer.
Compensatory Damages - the most common remedy for a breach of contract, given that there was not a liquidated damages clause, is compensatory damages. This compensates the other party for the financial loss they incurred because of a breach of contract. The amount awarded is usually intended to place the non-breaching party in a financial position they would have been placed in if the breaching party had performed as per the terms of contract. Conditional Release of Listing - rescinds the contract with some conditions
Consideration - in law refers to something of value given by one party in exchange for something of value from the other party to the contract. The consideration does not have to be in monetary form. It could be a promise to do or refrain from doing something, a promissory note, items of personal property, a service etc.
Contract - a contract is an exchange of promises between two or more parties to do or refrain from doing an act.
Counter offer - when one of the parties makes a change to the original offer. Legally, it is considered a revocation of the original offer.
Doctrine of Laches - states that a court has determined that a contract is unenforceable due to needless delay or neglect in filing a claim even though the statute of limitations may not have expired.
Emancipated minor - also has the right to enter into valid and binding contracts. An emancipated minor generally is a person who is under 18 and has a court-issued declaration of emancipation, is on active duty in the armed forces, or is or has been married.
Exclusive Agency Sale and Listing Agreement - the broker does not earn the listing portion of the commission if the seller produces a sale.
Exclusive Right to Sell and Listing Agreement - allows the broker to earn the listing portion of the commission, no matter who sells the property.
Executed contract - is a contract where all parties have fully performed all of the terms, promises and obligations within the contract.
Executory contract - is a contract where the terms, obligations and promises have not yet been performed
Express contract - is a contract in which all elements are specifically stated in words. This may be written or oral
Full Performance - when all of the parties have performed their obligations under a contract then a contract is discharged. This is known as full performance.
Implied contract - is an agreement which is found to exist based on the circumstances when to deny a contract would be unfair and/or result in unjust enrichment to one of the parties. It is created by the actions, rather than by written or oral agreement of the parties.
Lawful Objective - a legal contract cannot require any party to knowingly break the law. If so, the contract is usually void. Also known as a legal purpose
Lease agreement - is an agreement where a property owner (the landlord or lessor) allows a (tenant or lessee) to use the property for a specified period of time and for a specific amount of rent.
Legal description - of the property, which can be obtained from the last deed and supplied by the title company, is not the same as the street address. It is one of the three ways of legally describing property.
Legal Purpose - See Lawful objective
Legally Competent Parties - a person or entity (such as a business, trust or corporation) must be legally competent. If the party is a business, the person representing the business must also be legally competent and have the authority to act for the business.
Lessee - The tenant
Lessor - The landlord
Liquidated Damages - when both parties to a contract agree in advance to a dollar amount that will compensate the other party in the event of a breach, this is considered liquidated damages. This amount must be set forth in writing. There are two important points to remember about liquidated damages: (1) limits the amount the injured party can collect, (2) limits the damages due to the injured tp the amount specified.
Majority - Persons 18 years old or older are considered a majority.
Minor - is a person who is under the age of 18 in most states
Mutual agreement - all partie involved in the contract must agree to and accept the contract and its components. All parties must recognize and acknowledge that an agreement has been made and duly accepted (offer and acceptance, or meeting of the minds)
Novation - in the first instance, novation is the substitution of a new party into a contract. The original party is relieved of any obligation for the contract. Novation can also be the substitution of original contractual terms for new contractual terms if both parties agree to the new terms.
Offeree - the party accepting the offer
Offeror - the party making the offer
Option agreement - creates a right to buy, sell, lease or use a property for a set price and for a set period of time. The property owner who grants the option is called the optionor and the party that has the right of the option is the optionee. The optionor is bound by the contract to keep the option open for a certain period of time and must honor the option should the optionee decide to exercise this option. The optionee, is not obligated to exercise their option.
Optionee - the party that has the right of the option is the optionee in an option agreement
Optionor - the property owner who grants the option is called the optionor in an option agreement
Real estate contracts - are also known as installment contracts, land contracts, or contracts for deeds. The buyer which is known as the vendee, makes installment payments to the seller, which is known as the vendor. During these installment payments the vendor retains the deed to the property. The deed transfers to the vendee when the entire purchase price has been paid. During the installment period, the vendee has equitable title to the property to possess and enjoy the property.
Rescission- when a contract is cancelled and both parties are returned to their original position
Specific Performance- is a legal action where the court orders the party who breached the contract to perform according to the contract. In the circumstance of a Purchase and Sale Agreement, the seller would be obligated to sell the property as promised and deliver the deed to the buyer and the buyer would be obligated to purchase the property as promised. Specific performance, as a remedy may not always be possible.
Statute of Frauds - requires all real estate contracts to be in writing. See written contract Statute of Limitations - requires that lawsuits be filed within a certain period of time following a breach
Time Is Of The Essence - a phrase often used in contracts which says: the specified time and dates in this agreement are vital and thus, mandatory, and is important. Therefore, any delay, even slight, will be grounds for canceling the agreement.
Unenforceable Contracts - an unenforceable contract is a contract which cannot be enforced in a court of law. This could happen because the terms of the contract are ambiguous, or if one party has a voidable contract or if the Statute of Limitations has expired.
Unilateral contract - is a one-sided contract in that only one party has an obligation to perform under the contract. One party offers consideration in order to induce an act another party.
Valid Contracts- if a contract has all of the required elements, it is usually a valid and enforceable in a court of law.
Vendee - the buyer that makes payments to the seller on an installment contract
Vendor - seller who receives payments from the buyer on an installment contract
Void Contracts - a void contract is not a contract and has no effect in a court of law and cannot be enforced in a court of law. Most commonly, a void contract will be missing one or all of the essential elements needed for a valid contract. Neither party needs to take action to terminate it, since it was never a contract to begin with.
Voidable Contract - a voidable contract is a contract which may appear to be valid and has all of the necessary elements to be enforceable, but has some type of flaw which could cause one or both of the parties to void the contract. It is legally binding, but could become void. If there is an injured party involved, the injured party or the defrauded party must take action, otherwise the contract is considered valid.
Written Contract - Oregon State law which requires that all real estate contracts be in writing. This si required by the Statute of Frauds.