Contracts Cheat Sheet

Contracts are a necessity between parties negotiating the sale of a home or other properties. The below terms will help you begin to understand the intricacies of home buying contracts.

Contract Terminology:

Act of God (Force Majeure)
An unpreventable, destructive happening of the natural world or unavoidable cause of delay that keeps someone from performing a contract obligation on time
Addendum (Rider)
An attachment added on to an offer or contract
Affidavit
A written statement affirmed before an official who is authorized to administer such an oath
Annual debt service (ADS)
The total amount of principal and interest to be paid each year to satisfy the obligations of a loan contract.
Arbitration
Dispute settling process which includes the use of a neutral third party agreed upon by each side; an alternative to filing a suit in public courts
Boilerplate Language
Refers to words of a definite meaning that are commonly used in the same context in legal documents of like type. The words are usually strung together in phrases that have such settled meaning that they should apply to the circumstances governed by the document they are in
Breach of Contract/Default
Violations of the terms of a legal agreement; allows the nonbreaching party to rescind the contract, recover any deposits, sue for damages and expenses, sue for specific performance of the contract, or force the seller to sell the property in question
Contract to Purchase
An agreement between competent parties to do, or not do, certain things for legal consideration; to execute a contract for the sale of real estate, there must be the following:
- An Offer: A willingness to purchase a property at a specified price or a willingness to sell a property at a specified price
- An Acceptance: Agreement to accept an offer; upon acceptance, a sales contract is completed
- Competent Parties: Of legal age, legally capable of entering into a contract; party must also be of sound mind
- Consideration: The obligation that each party makes to the other to make the contract enforceable by law
- Earnest Money: Money put into an escrow account by the purchaser to show good faith that he/she wants to purchase the property
- Legal Purpose: To bind parties to perform the contract; due diligence to make a reasonable effort to execute the contract
- Written Documentation: A fully executed, signed, and accepted contract between the parties
- Description of the Property: The formal depiction of the dimensions and location of a property
- Signatures: All parties listed on the contract must sign for it to be legally binding
Notary Public
A sworn individual who is authorized to witness signatures, collect sworn statements, certify the validity of documents, and administer oaths; a fee may be charged for any of these services
Power of Attorney/Attorney in Fact
A written document authorizing a person to act on behalf of another person; used most often when either the buyer or seller cannot be present to close on a property
Rescind/Withdraw
To cancel an offer or contract
Right of First Refusal
The ability of a party to match the terms of a proposed contract before the contract is fully executed; some condo associations and cooperatives include this in their documents to be able to purchase a unit that an owner has listed under what the association deems a “fair price” to keep the other units’ values
Statute of Frauds
In a nutshell, a state law that requires that certain contracts pertaining to title of real property must be in writing and signed in order to be enforceable by law
“Time Is of the Essence”
A phrase meaning that performance by one party of the contract is dependent upon the timing of the other party as outlined by the contract
Tort
A wrongful act that makes a person liable to the victim for damages, that is neither a crime nor a breach of contract

2015 Consumer Reviews




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