Chapter Ten - Real Estate Contract Law

Question 1

An important legal feature of a contract is

a. it represents a “meeting of the minds.”
b. it must use precise wording in a document.
c. it is not voidable.
d. it can be created only by an attorney.

Answer 1

a. it represents a “meeting of the minds.”

Question 2

According to contract law, every valid contract is also

a. void.
b. enforceable.
c. enforceable or unenforceable.
d. voidable.

Answer 2

c. enforceable or unenforceable.

Question 3

The guardian for a mentally incompetent party enters into an oral contract with another party to buy a trade fixture. This contract

a. does not meet validity requirements.
b. is possibly valid and enforceable.
c. must be in writing to be valid.
d. is valid but unenforceable.

Answer 3

b. is possibly valid and enforceable.

Question 4

A prospective homebuyer submits a signed offer to buy a house with the condition that the seller pays financing points at closing. The seller disagrees, crosses out the points clause, then signs and returns the document to the buyer. At this point, assuming all other contract validity items are in order, the status of the offer is

a. an accepted offer, therefore a valid contract.
b. an invalid contract.
c. a counteroffer.
d. an invalid offer.

Answer 4

c. a counteroffer.

Question 5

As part of a construction contract between a contractor and a buyer, the contractor promises to complete construction by November 20. This promise can be construed as

a. competency on behalf of the contractor.
b. mutual consent.
c. good faith.
d. valuable consideration.

Answer 5

d. valuable consideration.

Question 6

An unscrupulous investor completes a contract with a buyer to sell a property the investor does not own. The sale contract for this transaction

a. is voidable.
b. must be in writing.
c. is void.
d. is illegal yet potentially enforceable.

Answer 6

c. is void.

Question 7

A homeowner encourages an agent to aggressively persuade a buyer to purchase his house by overinflating historical appreciation rates. The agent and the seller agree that 25% annual appreciation would work, even though this figure is four times actual rates. The pitch succeeds, and the seller accepts the buyer’s resulting offer. This contract is

a. enforceable.
b. voidable.
c. void.
d. valid.

Answer 7

b. voidable.

Question 8

The statute of limitations requires that parties to a contract who have been damaged or who question the contract’s provisions

a. must act within a statutory period.
b. must select a specific, limited course of action for recouping their losses.
c. must arbitrate prior to taking court action.
d. must wait a statutory period before they may take legal action.

Answer 8

a. must act within a statutory period.

Question 9

The purpose of the statute of frauds is to

a. invalidate certain oral contracts.
b. require certain conveyance-related contracts to be in writing.
c. nullify oral leases and listing agreements.
d. eliminate fraud in real estate contracts.

Answer 9

b. require certain conveyance-related contracts to be in writing.

Question 10

A seller immediately accepts a buyer’s offer but waits eight days before returning the accepted document to the buyer. Meanwhile, the offer has expired. Which of the following is true?

a. The buyer is bound to the contract since it was accepted immediately.
b. The buyer has no obligations to the seller whatsoever.
c. The buyer may not rescind the expired offer.
d. The seller may sue for specific performance.

Answer 10

b. The buyer has no obligations to the seller whatsoever.

Question 11

A buyer agrees to all terms of a seller’s offer except price. The buyer lowers the price by $1,000, signs the form, and mails it back to the seller. At this point, the seller’s offer

a. is void.
b. becomes an executory contract.
c. becomes a counteroffer.
d. has been accepted.

Answer 11

a. is void.

Question 12

A buyer submits an offer to a seller. Two hours later, the buyer finds a better house, calls the first seller, and withdraws the offer. Which of the following is true?

a. The buyer may not revoke the offer in such a short period of time.
b. The first seller may sue the buyer for specific performance.
c. If the seller accepted the offer, the buyer must perform.
d. The original offer is legally extinguished.

Answer 12

d. The original offer is legally extinguished.

Question 13

Real estate contracts that are not personal service contracts

a. may be assigned.
b. are not assignable.
c. must be in writing.
d. are exempt from the statute of frauds.

Answer 13

a. may be assigned.

Question 14

Which of the following contracts must be in writing to be enforceable?

a. A parol contract.
b. A six-month lease.
c. A two-year lease.
d. An executory contract.

Answer 14

c. A two-year lease.

Question 15

A good example of a unilateral contract is

a. an option to purchase.
b. a listing agreement.
c. a personal services agreement.
d. a sale contract.

Answer 15

a. an option to purchase.

Question 16

A contract is discharged whenever

a. there is a cooling period.
b. both parties have signed it.
c. it is performed.
d. the parties agree to their respective promises.

Answer 16

c. it is performed.

Question 17

A contract may be defensibly terminated without damages if

a. it is abandoned by one party.
b. it is impossible to perform.
c. it is deemed to be valid.
d. both parties breach its terms.

Answer 17

b. it is impossible to perform.

Question 18

A landlord suddenly terminates a tenant’s lease in violation of the lease terms. The tenant takes action to compel the landlord to comply with the violated terms. This is an example of a suit for

a. rescission.
b. specific performance.
c. damages.
d. forfeiture.

Answer 18

b. specific performance.