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CA Real Estate Sales > CHAPTER 5 -- CONTRACTS > Flashcards

CHAPTER 5 -- CONTRACTS Flashcards

0
Q

What is the name of a contract where both parties have completely performed their duties?

A

An executed contract

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1
Q

What is the name of a contract in which something remains to be done by one or both parties?

A

An executory contract

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2
Q

What is the name of a contract expressed in words, either oral or written?

A

An express contract

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3
Q

What is the name of a contract which is valid and enforceable on its face, but because of some defect, one or more of the parties may reject it?

A

A voidable contract. Bonus – it’s still valid unless it is voided by the injured party.

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4
Q

What is the name for a contract that lacks legal effect, as well as one or more of the four essential elements required by law to make a contract?

A

A void contract

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5
Q

An employment contract between the seller of a home and a broker, whereby the seller agrees to pay the broker a commission if she produces a “ready, willing, and able” buyer and in return, the broker agrees to use due diligence in procuring a the buyer, is called:

(A) a unilateral executory contract; (B) a unilateral executed contract; (C) a bilateral executory contract; (D) a bilateral executed contract.

A

(C) a bilateral executory contract

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6
Q

Joe, a licensed real estate broker, has just written up an exclusive listing on Fred’s home. At this time, Joe’s listing may be described as:

(A) a bilateral contract; (B) an executory contract; (C) an express contract; (D) all of the above.

A

(D) all of the above

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7
Q

A contract which is voidable remains binding upon the buyer and seller until the contract is:

(A) invalidated; (B) rescinded; (C) discovered; (D) qualified.

A

(B) rescinded

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8
Q

When is the contract for the deposit receipt formed?

A

When the final acceptance is communicated to the offeror.

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9
Q

What are the four essential elements for a lawful contract?

A

1 - Capable parties
2 - Mutual consent
3 - Lawful object
4 - Consideration

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10
Q

Are married minors and veterans who are minors considered emancipated?

A

Yes, they can enter into contracts.

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11
Q

What are the three steps for mutual consent to be created?

A

1 - Offer by one party
2 - Acceptance by the other party (mirror image, anything else is a counteroffer)
3 - Acceptance communicated to the offeror

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12
Q

The contract date of a deposit receipt is the date in that:

(A) the earnest money was received; (B) the contract has been prepared by the agent; (C) buyer signed the contract; (D) final acceptance was properly communicated back to the offeror.

A

(D) final acceptance was properly communicated back to the offeror

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13
Q

Broker Jones represented a young man in the sale of his home. Broker Jones did not consider the age of the young man when he listed and sold the home. After the grant deed had been signed and delivered into escrow, the title company discovered the young man who signed the deed was not yet 18 years old and was not emancipated. The grant deed would be:

(A) illegal; (B) void; (C) binding; (D) valid

A

(B) void

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14
Q

John made an offer which the seller accepted; however, the seller changed a term of the offer as he made acceptance. This can be described as a:

(A) purchase contract; (B) counter-offer; (C) addendum; (D) amendment

A

(B) counter-offer

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15
Q

What are the three things that can prevent mutual consent?

A

1 - Fraud
2 - Mistake
3 - Duress

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16
Q

What do the words “adequate, valuable, good, or sufficient” refer to in a contract?

A

Consideration

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17
Q

Is performance an essential element in the formation of a contract?

A

No

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18
Q

By the Statute of Frauds, which 5 contracts must be in writing in order to be enforceable?

A 
1 - Not performed within one year
2 - Lease for more than one year
3 - Listing to sell property
4 - Contract to sell real property
5 - An arrangement to pay another's debt
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19
Q

A contract entered into under duress would be:

(A) voidable; (B) valid; (C) void; (D) illusory

A

(A) voidable

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20
Q

All of the following contracts are voidable EXCEPT a contract entered into:

(A) under undue influence; (B) for an illegal purpose; (C) under duress; (D) as the result of fraud.

A

(B) for an illegal purpose

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21
Q

The words “adequate, valuable, good or sufficient” in a contract refer to:

(A) mutual consent; (B) performance; (C) consideration; (D) compensation.

A

(C) consideration

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22
Q

What oral real estate contracts are enforceable?

A

1 - Lease of real property for one year or less
2 - Listing contract to sell PERSONAL property (a business opportunity)
3 - An agreement between brokers to share a commission

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23
Q

What is it called when there is an agreement of the parties to substitute a new contract for an existing one with the intent to replace the original contract?

A

Novation

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24
Q

What is a unilateral act and its legal consequences?

A

A waiver

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25
Q

According to the Statute of Frauds, all of the following contracts are required to be in writing to be enforceable, EXCEPT:

(A) a listing to sell real property; (B) a contract selling real property; (C) an agreement between real estate brokers to share a commission; (D) none of the above.

A

(C) an agreement between real estate brokers to share a commission

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26
Q

What is it called when one party is substituted for another party in a contract?

(A) waiver; (B) rescission; (C) redaction; (D) novation.

A

(D) novation

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27
Q

The meaning of the word “waiver” as it is applicable to a real estate transaction most nearly means:

(A) a unilateral act and its legal consequences; (B) the justifiable reliance by one party upon the intentional act or omission of another; (C) tender; (D) estoppel.

A

(A) a unilateral act and its legal consequences

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28
Q

What are the two remedies for breach of contract?

A

1 - Specific performace (when money won’t “make the buyer whole” the seller must sign over the grant deed)
2 - Sue for damages

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29
Q

What is the clause in a contract that fixes the amount of damages should one of the parties default?

A

Liquidated damages clause

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30
Q

When a buyer defaults, who gets the liquidated damages?

A

They are usually divided equally between the seller and the listing agent.

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31
Q

In a legal dispute when there is a conflict between the preprinted clauses and the handwritten information in a contract, which will control?

(A) preprinted clauses take precedence over handwritten information; (B) the handwritten information takes precedence over the preprinted clauses; (C) the preprinted clauses and handwritten information are considered equally; (D) handwritten information is illegal on preprinted contracts.

A

(B) the handwritten information takes precedence over the preprinted clauses

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32
Q

In real estate contracts, the consideration must be sufficient relative to value in order to win a lawsuit seeking:

(A) a lis pendens; (B) specific performance; (C) an attachment; (D) damages

A

(B) specific performance

33
Q

When the facts of a lawsuit suggest than an award of money damages would not provide an adequate remedy for breach of contract, the person bringing the suit may seek specific performance. Which of the following people will NOT get a specific performance judgment from the court?

(A) a real estate broker in his capacity as agent for the principal; (B) a buyer who is purchasing a home; (C) an attorney-in-fact acting for a buyer who resides in another state; (D) the buyer of vacant land.

A

(A) a real estate broker in his capacity as agent for the principal

34
Q

What are the three types of listings?

A

1 - Open Listing (non-exclusive listing)
2 - Exclusive Agency Listing
3 - Exclusive Authorization and Right to Sell Listing

35
Q

When a salesperson takes a listing, the listing is the property of:

(A) the salesperson who took the listing; (B) the broker who employs the salesperson; (C) both the employing broker and the listing salesperson; (D) the multiple listing service.

A

(B) the broker who employs the salesperson

36
Q

Broker John has an open listing on a home. One day he shows the home to Buyer Bud. Buyer Bud says he does not like the home and leaves. One week later, Buyer Bud goes to Broker Joan. Broker Joan has an open listing on the exact same home and shows it to Buyer Bud. This time Buyer Bud says he loves the hoem. He has Broker Joan write and present an offer, which is accepted by the seller. Who is entitled to the commission?

(A) Broker John; (B) Broker Joan; (C) Broker John and Broker Joan must split the commission; (D) none of the above.

A

(B) Broker Joan

37
Q

With regard to the practice of real estate, which of the following statements is correct?

(A) a real estate agent’s commission is limited by law in all transactions; (B) a broker may never collect a commission if a sale is consummated after a listing has expired; (C) an agreement to divide commissions between cooperating brokers must be in writing to be enforceable; (D) in an exclusive agency listing, a seller may sell directly to a buyer without being liable for a commission.

A

(D) in an exclusive agency listing, a seller may sell directly to a buyer without being liable for a commission

38
Q

For what one act is the seller’s broker considered an agent for the buyer?

A

If the broker is not authorized to receive a deposit, but receives one anyway.

39
Q

In which of the following listings would the agent who was the procuring cause of a successful offer possibly earn no commission?

(A) open listing; (B) exclusive agency listing; (C) exclusive right to sell listing; (D) net listing.

A

(D) net listing

40
Q

An exclusive right to locate property listing with a buyer is:

(A) a single agency representing the buyer only; (B) a dual agency for both buyer and seller, even without the consent of the parties; (C) a single agency to the buyer, but could become a dual agency representing both buyer and seller with the knowledge and consent of both parties; (D) not allowed.

A

(C) a single agency to the buyer, but could become a dual agency representing both buyer and seller with the knowledge and consent of both parties

41
Q

A real estate broker has the right to be paid a commission when a property sells during the listing period. What is the name of the clause in many listings which allows the broker to earn a commission when the property sells after the listing has expired?

(A) broker’s safety clause; (B) exculpatory clause; (C) subordination clause; (D) none of the above.

A

(A) broker’s safety clause

42
Q

What is a clause in a listing contract designed to protect an agent from liability for false information given by the seller about the condition of a property?

A

Hold Harmless Clause

43
Q

Does an open listing need an expiration date?

A

No, it does not.

44
Q

The purpose of a “hold harmless” clause in a listing contract is to protect the agent from the liability for:

(A) any and all lawsuits resulting from the transaction; (B) misrepresentations made by the agent to a potential buyer; (C) false information given by the seller concerning the condition of the property; (D) damages as a result of the buyer misrepresenting his qualifications to get a loan.

A

(C) false information given by the seller concerning the condition of the property

45
Q

What are the minimum and maximum lengths of time for which a real estate agent may have an exclusive authorization and right to sell listing on real property?

(A) 1 day and 90 days; (B) 1 week and 45 days; (C) 1 month and 6 months; (D) the listing may be for any length of time, determined by mutual agreement of seller and listing agent.

A

(D) the listing may be for any length of time, determined by mutual agreement of seller and listing agent

46
Q

A real estate licensee may do any of the following EXCEPT:

(A) claim compensation on a loan he arranged, but did not negotiate; (B) claim compensation on an open listing without a definite termination date; (C) sell his own property and claim a commission expense on taxes; (D) claim compensation on an exclusive listing without a definite termination date.

A

(D) claim compensation on an exclusive listing without a definite termination date

47
Q

What are the four things that can terminate an offer?

A

1 - Revocation by buyer prior to acceptance
2 - Rejection of the offer by the seller or a counter
3 - Death of buyer
4 - Expiration of a time limit given in the offer

48
Q

Who pays for damages made by an inspector to a seller’s property?

A

The buyer

49
Q

If the seller quickly fixes a problem found during a home inspection, is the buyer bound by the contract?

A

Yes, the buyer is bound by the contract

50
Q

A prospective buyer may withdraw her offer at any time before the seller’s acceptance of her offer has been communicated to her:

(A) unless the offer states that the offer is irrevocable; (B) provided the offer is not supported by a deposit; (C) only if the offeree has made a counter-offer; (D) for any reason.

A

(D) for any reason

51
Q

The “time is of the essence” clause in the residential purchase agreement refers to which of the following?

(A) offer will expire if not accepted within ___ days of presentation; (B) offer is contingent upon ___; (C) deposit must be delivered into escrow within ___ days of acceptance; (D) the entire contract.

A

(D) the entire contract

52
Q

Broker Hernandez had just received a full price offer on her listing. As the broker was leaving her office to present the offer, another broker hander her a second offer for $1,000 less than the listed price but which contained a larger down payment and better terms. What should Broker Hernandez do?

(A) tell the other broker the listing has already sold?; (B) present both offers to the seller at the same time; (C) present both offers to the seller in the order received; (D) approach the first offeror an seek a higher offer on behalf of Hernandez’s client.

A

(B) present both offers to the seller at the same time

53
Q

If a seller requests the deposit after an offer is accepted, what must the broker do before releasing it to them?

A

The broker must obtain written consent of the buyer before releasing the check to the seller.

54
Q

Is an optionee obligated to make a purchase?

A

No, and it can totally restrict the optionor and effectively put a cloud on title for the length of the option.

55
Q

Does the optionee gain any legal interest in the title to the property encumbered by the option?

A

No, they do not have any title or any right to use the land.

56
Q

What gives a broker the authority to hold a buyer’s deposit for three business days, or until the offer is accepted?

(A) the deposit receipt; (B) the listing; (C) the transfer disclosure statement; (D) the agency disclosure.

A

(A) the deposit receipt

57
Q

A broker has an oral listing to sell real property. The broker presented an offer, which the seller accepted. The seller then requested that the broker give him the buyer’s deposit check. The broker must:

(A) first deposit the check into the broker’s trust account; (B) deposit the check with a neutral escrow within three business days; (C) obtain the written consent of the buyer before releasing the check to the seller; (D) return the check to the buyer within three business days.

A

(C) obtain the written consent of the buyer before releasing the check to the seller

58
Q

What is the name of the agreement whereby the agent has the right to represent the seller in the sale of the property or purchase the property himself?

(A) open listing; (B) option listing; (C) exclusive agency listing; (D) exclusive right to sell listing.

A

(B) option listing

59
Q

How is the desk cost calculated?

A

By dividing the total operating expenses of the office, including salaries, rent, insurance, etc., by the number of the salespersons.

60
Q

What is the company dollar?

A

The company dollar is calculated by subtracting commissions paid to salespersons form the gross income of the brokerage.

61
Q

To be competitive, yet profitable in business, a real estate broker needs to be concerned with “desk cost.” Which of the following most nearly represents the correct way to calculate “desk cost?”

(A) add the total cost of all the furniture for each salesperson; (B) calculate the gross annual profit for the firm, less the expenses, divided by the number of salespersons; (C) divide the gross commission earned by the number of desks; (D) divide the total operating expenses of the office, including salaries, rent, insurance, etc. by the number of salespersons.

A

(D) divide the total operating expenses of the office, including salaries, rent, insurance, etc. by the number of salespersons

62
Q

A company dollar can be defined as:

(A) the money required to establish the office; (B) the money left over after expenses; (C) the money left over after all commissions are subtracted from gross income; (D) the money the company spends to support the office.

A

(C) the money left over after all commissions are subtracted from gross income

63
Q

Which listing must contain the statement, “the amount of our rate of commission is not fixed by law. It is set by each broker individually and may be negotiable between the seller and broker.”

(A) a lisitng on a 50 unit apartment building; (B) a listing on a commercial building; (C) a listing on a building used for manufacturing; (D) a listing on one-to-four residential units.

A

(D) a listing on one-to-four residential units

64
Q

When two parties attempt to form a contract, but fail to include one or more of the four essential elements of contracts, the attempted contract is properly called:

(A) an enforceable contract; (B) a void contract; (C) an express contract; (D) a unilateral contract.

A

(B) a void contract

65
Q

None of the following persons may lawfully enter into a valid contract to purchase real property EXCEPT:

(A) unemancipated minors; (B) minors who are wards of the court; (C) convicts in prison; (D) aliens.

A

(D) aliens

66
Q

Broker Smith presented a written offer to Seller Burns from buyer Taylor. The offer stated that upon acceptance buyer Taylor would deposit $15,000 into escrow. Seller Burns made some amendments by innerlining changes, but did not change the amount of deposit. Buyer Taylor agreed to all the changes and changed the amount of the deposit to $1,000. Broker Smith should be aware that:

(A) Buyer Taylor has created a counter-offer because of the changed deposit; (B) Broker Smith must get Seller Burns’ acceptance of the counter-offer; (C) no contract has yet been formed; (D) all of the above are true.

A

(D) all of the above are true

67
Q

Which of the following is NOT an essential element in the formation of a contract?

(A) offer; (B) acceptance; (C) capable parties; (D) performance.

A

(D) performance

68
Q

Which of the following are necessary for a real property conditional sales contract to be valid?

(A) consideration, offer and acceptance, mutuality, competent parties, and legally sufficient writing; (B) consideration, offer and acceptance, expressed time element and price; (C) lawful object, competent parites, offer and acceptance, and legally sufficient writing; (D) consideration, offer and acceptance, lawful object, competent parties, and legally sufficient writing.

A

(D) consideration, offer and acceptance, lawful object, competent parties, and legally sufficient writing

69
Q

An offer of performance in connection with a contract is called:

(A) a conditional offer; (B) a tender; (C) a covenant; (D) a license.

A

(B) a tender

70
Q

The clause in a real estate deposit receipt that sets forth a definite amount of damages to be paid to the seller in the event of a breach of contract by the buyer, and which requires both buyer and seller’s initials to be placed in the designated places on that contract is known as:

(A) caveat emptor clause; (B) buyer beware clause; (C) seller’s damages clause; (D) liquidated damages.

A

(D) liquidated damages

71
Q

Who are the parties to a listing contract?

(A) broker and seller; (B) broker, seller and salesperson who took the listing; (C) broker, seller, salesperson who took the listing, and multiple listing service; (D) broker, seller, salesperson who took the listing, multiple listing service, butcher, baker, candlestick maker.

A

(A) broker and seller

72
Q

Under which of the following listings must the seller pay a commission, even though he finds the buyer himself?

(A) non-exclusive listing; (B) exclusive agency listing; (C) exclusive right to sell listing; (D) open listing.

A

(C) exclusive right to sell listing

73
Q

What gives a broker the authority to receive a deposit for a seller as the seller’s agent?

(A) the deposit receipt; (B) the listing; (C) the transfer disclosure statement; (D) the agency disclosure.

A

(B) the listing

74
Q

A broker is trying to list real estate owned by a non-profit unincorporated association. To be sure that the proper party signs the listing, he should:

(A) ask the lending institution that lent the money to build the church; (B) ask two past officers of the association; (C) check the bylaws or the charter to see who has the authority to sell the property; (D) examine the minutes of the last Board of Director’s meeting.

A

(C) check the bylaws or the charter to see who has the authority to sell the property

75
Q

Each of the following will terminate an offer to buy real estate, EXCEPT:

(A) the offeror revokes offer after offeree has properly posted acceptance of the offer; (B) the offeree fails to accept the offer within the time limit specified in the offer by the offeror; (C) the offeree makes a counteroffer to the offeror; (D) the offeror dies or is declared legally incompetent prior to the offeree’s acceptance.

A

(A) the offeror revokes offer after offeree has properly posted acceptance of the offer

76
Q

Broker Bob wrote up an offer to buy property for Buyer Don. Before Broker Bob could inform Buyer Don that his offer had been accepted, Buyer Don died of a heart attack. Under these circumstances there is:

(A) a binding contract on the heirs of Buyer Don; (B) a binding contract because, the death of the buyer does not terminate an offer; (C) no contract; (D) a binding contract, only if Broker Don places a copy of the signed contract in the deceased buyer’s hand prior to the funeral.

A

(C) no contract

77
Q

In which of the following contracts does one of the parties agree not to revoke an offer?

(A) lease; (B) option; (C) open listing; (D) deposit receipt.

A

(B) option

78
Q

Broker Hernandez took a listing from owner, Mr. Nguyen. Mr. Nguyen also gave Broker Hernandez the option to purchase this commercially zoned land within 30 days. On the 27th day of the option period, Broker Hernandez decided to purchase th eland. Broker Hernandez must do which of the following before purchasing this property which he also listed for sale?

(A) furnish owner with any material information Broker Hernandez has in his possession concerning the proeprty; (B) disclose to Mr. Nguyen any outstanding offers on the property; (C) obtain written consent of Mr. Nguyen approving the amount of profit or anticipated profit if any is to be realized; (D) do all of the above.

A

(D) do all of the above

79
Q

When a group of competing local brokers get together and agree on setting commissions based upon a minimum commission schedule, this is considered:

(A) a violation of anti-trust law; (B) approriate business cooperation; (C) good consumer protection; (D) allowed, if approved by their local realty MLS.

A

(A) a violation of anti-trust law

CA Real Estate Sales (18 decks)

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