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CA Real Estate Principles > Contracts > Flashcards

Contracts Flashcards

1
Q

Failure to perform any of the terms or conditions of a contract is called

(a) breach.
(b) novation.
(c) break.
(d) addendum.

A

(a)breach.

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2
Q

When speaking about contract obligations, the word “execute” means

(a) signing of the document.
(b) death of one party to the contract.
(c) performance of contract obligations.
(d) cancellation of the contract prior to performance.

A

(c)performance of contract obligations.

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3
Q

A contract signed under duress is

(a) void.
(b) voidable.
(c) illegal.
(d) enforceable.

A

(b)voidable.

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4
Q

You enter into a contract with a person not knowing he was judicially declared incompetent. The incompetence of one of the parties to this agreement would make the contract

(a) void.
(b) valid.
(c) enforceable.
(d) valid until voided by the court.

A

(a)void.

Since one of the parties to the agreement was incompetent, the contract is void.

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5
Q

Which of the following describes “mutual consent?”

(a) Offer and acceptance
(b) Tender
(c) Counter offer
(d) None of the above

A

(a)Offer and acceptance

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6
Q

In most cases, an offer may be revoked

(a) prior to close of escrow.
(b) before it is accepted, as long as the revocation is communicated directly to the offeree.
(c) at any time, for any reason, as long as the revocation is in writing.
(d) at any time as long as consideration has changed hands.

A

(b)before it is accepted, as long as the revocation is communicated directly to the offeree.

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7
Q

Which of the following is an example of actual fraud?

(a) An inadvertent omission of a material fact by a subcontractor (i.e., termite company).
(b) A promise made without any intention of performing it.
(c) An unfulfilled promise to hold a certain number of open houses without deliberate intent to deceive.
(d) An accidental slip of the tongue without the intent to deceive.

A

(b)A promise made without any intention of performing it.

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8
Q

Which of the following is a potential penalty for fraud?

(a) Loss or suspension of a real estate license
(b) Money damages
(c) Criminal prosecution resulting in a fine and/or imprisonment
(d) All of the above

A

(d)All of the above

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9
Q

If an “exclusive authorization and right to sell listing” does not contain a complete legal description,

(a) the listing is void.
(b) it is a violation of the Real Estate Law.
(c) the listing is unenforceable.
(d) None of the above

A

(d)None of the above

A complete legal description is not required for a listing, however, the description must be adequate, clear and not ambiguous.

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10
Q

Which of the following types of contracts must be in writing under the Statute of Frauds?

(a) listing agreement
(b) an agreement that will not be completed within one year
(c) a lease of real property for more than one year
(d) All of the above

A

(d)All of the above

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11
Q

Both parties to a contract wish to terminate their agreement, restoring them to their original positions. This is called

(a) release
(b) novation
(c) breach
(d) rescission

A

(d)rescission

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12
Q

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

(a) redaction
(b) novation
(c) subordination
(d) hypothecation

A

(b)novation

The most general definition of novation is the substitution of a new obligation for an old one. It also means substitution of new parties to an existing obligation, as when the parties to an agreement accept a new debtor in place of an old one. For example, in the assumption of a loan, the lender may release the seller and substitute the buyer as the party primarily liable for the mortgage debt.

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13
Q

Failure to perform any of the terms or conditions of a contract is called

(a) breach.
(b) novation.
(c) break.
(d) addendum.

A

(a)breach.

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14
Q

According to the statute of limitations, an action based on a written real estate sales contract must be brought within

(a) five years.
(b) four years.
(c) three years.
(d) one year.

A

(b)four years.

5-4-3-2-10.
• A lawsuit to recover title to real property must be brought within five years.
• An action based on a written instrument (such as a real estate sales contract) must be brought within four years.
• An action based on fraud must be brought within three years of the discovery of the fraud.
• An action based on an oral agreement (such as a lease for only a few months) must be brought within two years.
• An action based on a judgment must be brought within 10 years of the awarding of the judgment.

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15
Q

Since a purchase contract is such a long and quite detailed contract, it is likely to contain corrections and written additions. The general rule regarding corrections to preprinted forms is

(a) typed corrections take precedence over handwritten insertions.
(b) corrections and/or written additions are not allowed on preprinted forms.
(c) handwritten insertions take precedence over both typed and preprinted material.
(d) preprinted insertions take precedence over handwritten insertions.

A

(c)handwritten insertions take precedence over both typed and preprinted material.

  • Typed insertions take precedence over preprinted material.
  • Handwritten insertions take precedence over both typed and preprinted material.
  • Specific information takes precedence over general information.
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16
Q

A broker sells a house advertised “as-is.” There are no obvious defects that would be evident to a prudent buyer upon inspection, but the seller and the broker know that the plumbing is very defective. The buyer moves in and discovers the defects. The buyer then sues the broker and the seller for misrepresentation. The suit will probably be

(a) Successful because the seller and the broker withheld material information that should have been disclosed.
(b) Successful because an “as-is” clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.
(c) Unsuccessful because selling the property “as-is” gives constructive notice that there are defects.
(d) Unsuccessful because the defects would have been revealed if the purchase agreement had contained an inspection clause.

A

(b)Successful because an “as-is” clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.

17
Q

To verify the condition of the property prior to close of escrow, it is a good idea to do a

(a) secondary property inspection
(b) final walk-through
(c) drive-by
(d) contingency removal

A

(b)final walk-through

18
Q

Which of the following statements is correct regarding mold or radon gas on the property?

(a) It is the responsibility of the seller (or the seller’s agent) to test for either mold or radon.
(b) If radon gas or mold is known to exist on the property, it must be revealed to a prospective buyer.
(c) Both (a) and (b) are correct.
(d) neither (a) nor (b) are correct.

A

(b)If radon gas or mold is known to exist on the property, it must be revealed to a prospective buyer.

19
Q

A counteroffer by the seller

(a) creates a brand new offer that replaces the buyer’s original offer.
(b) amends the original offer from the buyer, essentially adding to it.
(c) accepts the original offer and starts a back-up offer.
(d) rejects the original offer and bars that buyer from submitting future offers.

A

(a)creates a brand new offer that replaces the buyer’s original offer.

20
Q

Which of the following accurately describes a listing agreement which allows the broker to either find a prospective buyer, or purchase the home himself/herself?

(a) Exclusive authorization and right to sell
(b) Open listing
(c) Net listing
(d) Option listing

A

(d)Option listing

21
Q

Prior to close of escrow the subject property burns to the ground without fault of the buyer or buyer’s agent and neither the legal title nor possession of the property had been transferred to the buyer. In this case, which of the following is the most likely outcome?

(a) The buyer must still complete the terms of the contract.
(b) The buyer must still complete the terms of the contract but the seller’s insurance will cover rebuilding the home.
(c) The seller cannot enforce the contract and the buyer is entitled to recover any part of the purchase price paid.
(d) The buyer can back out of the deal but will lose his/her down payment.

A

(c)The seller cannot enforce the contract and the buyer is entitled to recover any part of the purchase price paid.

If a material part of the real property is destroyed without fault of the buyer (or is taken by eminent domain), and neither the legal title nor possession of the property has been transferred to the buyer, the seller cannot enforce the contract and the buyer is entitled to recover any part of the purchase price that has already been paid.

22
Q

A contract that has yet to be performed is known as an:

	(a) executed contract.
	(b) express contract.
	(c) implied contract.
	(d) executory contract.
A

(d) executory contract.

23
Q

contract that is a promise for a promise is known as a:

	(a) bilateral contract.
	(b) voidable contract.
	(c) unilateral contract.
	(d) void contract.
A

(a) bilateral contract.

24
Q

The typical real estate purchase agreement is:

	(a) a unilateral contract.
	(b) a bilateral contract.
	(c) an implied contract.
	(d) a voidable contract.
A

(b) a bilateral contract.

25
Q

A contract that has no legal effect from its inception is a:

	(a) void contract.
	(b) voidable contract.
	(c) quasi contract.
	(d) valid contract.
A

(a) void contract.

26
Q

To be enforceable, a real estate sales agreement must:

	(a) contain a granting clause.
	(b) be in writing.
	(c) be acknowledged.
	(d) be recorded.
A

(b) be in writing.

27
Q

Both parties agree to cancel a contract in the process:

	(a) release.
	(b) rescission.
	(c) novation.
	(d) reformation.
A

(b) rescission.

28
Q

When both parties to a contract agree to substitute a new agreement for the present one, this is known as a:

	(a) release.
	(b) rescission.
	(c) novation.
	(d) breach.
A

(c) novation.

29
Q

Performance of a contract may be excused if a party can prove which of the following?

	(a) Impracticability of performance
	(b) A better deal elsewhere
	(c) Novation
	(d) Lack of negotiating skill
A

(a) Impracticability of performance

30
Q

Which of the following is NOT a way to terminate a contract?

	(a) Rescission
	(b) Release
	(c) Verification
	(d) Novation
A

(c) Verification

31
Q

Failure to perform a contract obligation is known as a:

	(a) release.
	(b) rescission.
	(c) novation.
	(d) breach.
A

(d) breach.

CA Real Estate Principles (15 decks)

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