Exam vocabulary
Contracts Glossary
25 Contracts terms the exam expects you to know, in plain English.
- Addendum
- A document adding new terms to an existing contract without changing its original provisions.
- Amendment
- A document that changes or modifies existing terms within a contract both parties have already signed.
- Bilateral Contract
- A contract in which both parties exchange mutual promises to perform.
- Consideration
- Something of value exchanged between contracting parties, required for a contract to be legally binding.
- Contingency
- A condition in a contract that must be satisfied before the parties are obligated to complete the transaction.
- Counteroffer
- A response to an offer that changes its terms, which rejects the original offer and creates a new one.
- Exclusive Agency Listing
- A listing agreement where one broker is the sole agent, but the seller may still sell the property themselves without owing commission.
- Exclusive Right to Sell Listing
- A listing agreement guaranteeing the broker commission regardless of who finds the buyer, including the seller.
- Executed Contract
- A contract in which all parties have fully performed their obligations.
- Executory Contract
- A contract in which one or more obligations remain to be performed by the parties.
- Liquidated Damages
- A predetermined amount, often the earnest money, agreed as compensation if a party breaches the contract.
- Meeting of the Minds
- Mutual agreement between contracting parties on the essential terms of their agreement.
- Mirror Image Rule
- The contract principle that an acceptance must match the exact terms of the offer, or it becomes a counteroffer.
- Net Listing
- A listing arrangement where the broker's commission is any amount above a minimum price the seller sets, generally discouraged or prohibited.
- Novation
- The substitution of a new party or new obligation for an old one, releasing the original party from liability.
- Offer
- A definite proposal by one party to enter into a contract, communicated to the other party for acceptance.
- Open Listing
- A non-exclusive listing agreement where the seller may work with multiple brokers and owes commission only to the one who procures a buyer.
- Option Contract
- An agreement giving a party the exclusive right, but not the obligation, to purchase property within a set period.
- Right of First Refusal
- A contractual right giving a party the first opportunity to buy or lease a property before the owner offers it to others.
- Specific Performance
- A legal remedy in which a court orders a breaching party to fulfill their exact contractual obligations.
- Statute of Frauds
- A legal requirement that contracts for the sale of real estate be in writing to be enforceable.
- Time Is of the Essence
- A contract clause making strict adherence to stated deadlines a material term of the agreement.
- Unilateral Contract
- A contract in which only one party makes a promise, which becomes binding once the other party performs an act.
- Void Contract
- An agreement that has no legal force or effect from the outset, as if it never existed.
- Voidable Contract
- A contract that one party may legally cancel or affirm, often due to a defect like a party's lack of capacity.
Study the concepts behind these terms: Contracts study guide
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