LESSON 11: COMMON CONTRACT MISTAKES Flashcards
What can happen if one or more dates are left blank in a contract?
It can cause confusion and may result in the failure of the contract.
Why is dating the contract important?
The effective date is crucial for calculating other important dates in the contract. Without it, the contract may be problematic.
What should be done if contact information is incomplete or inaccurate?
Accurate contact information is essential for effective communication and legal notices.
What issue arises from setting unrealistic deadlines in a contract?
Unrealistic deadlines may require extensions, resulting in more paperwork, signatures, and potentially allowing a party to terminate the contract.
What problems can occur from leaving boxes unchecked in a contract?
Unchecked boxes can lead to confusion about what the parties intended, and checking the wrong box can lead to serious errors, like missing the “as-is” option.
Why is it important to research required documents before agreeing to produce them?
Failure to verify the existence of required documents, like a survey, may result in additional costs for the seller.
What is the risk of using a poor legal description in a contract?
It could result in the sale of the wrong property or leave out key portions of the property, such as acreage, causing legal issues.
What is the purpose of the Special Provisions section in a contract?
It is used to insert factual statements and business details about the sale, but not to include legal agreements.
Why is it important for all appropriate parties to sign the contract?
All individuals with an interest in the property and the buyer should sign the contract to make it valid.
What should be considered when setting a closing date?
Ensure the closing date doesn’t fall on a holiday or weekend when banks and title companies are closed.
Why is it crucial to observe deadlines in a contract?
Missing deadlines, like those for title commitments or earnest money payments, can cause legal problems and may prevent completing the sale.
What should be done before assuming a property is zoned for a certain use?
Verify zoning details in writing, especially from governmental agencies, to avoid future issues.
What is necessary if a client is buying or selling on behalf of someone else?
Ensure there is valid legal authorization, such as a power of attorney, court order, or corporate resolution.
Why should changes to a deal always be put in writing?
Oral agreements or informal changes can lead to lawsuits or legal issues, so written documentation is critical.
What risks arise from not disclosing material defects in a property?
Failure to disclose problems can lead to serious legal consequences and loss of the real estate license.
What should be written down regarding possession of a property?
Any agreement on possession, including short-term leases, should be documented in writing to avoid future misunderstandings.
What is the concept of unilateral mistake in Texas real estate contracts?
A party typically cannot avoid a contract due to their own mistake unless the other party was aware of or induced the mistake.
When can equitable relief be granted for a unilateral mistake?
Equitable relief is granted if the mistake is significant, material, made with ordinary care, and rescission doesn’t prejudice the other party except for the loss.
What is a real estate license holder not allowed to do under Texas law?
They can only fill in blanks on promulgated forms and add business details to paragraph 11, not insert legal provisions.
What is a ground for suspension or revocation of a real estate license under Sec. 1101.652?
Failure to use a contract form required by the commission under Section 1101.155.
What must be included in a listing contract form adopted by the commission?
- A provision informing that real estate commissions are negotiable. 2. A provision explaining the availability of Texas coastal natural hazards information.
What is the consequence of using an incorrect addendum in a real estate contract, such as “Seller is to leave the refrigerator” instead of the Non-Realty Items Addendum?
Violation of Texas Real Estate Commission rules.
What action is considered unauthorized practice of law in real estate transactions?
Writing things like “Contract is contingent on inspections” or “Contract is contingent upon the sale of the buyer’s present home” instead of using appropriate addenda.
What does Sec. 1101.652(a) authorize the commission to do?
Suspend or revoke a license for various violations, including misrepresentation, fraud, dishonesty, and failure to follow legal requirements.
What is the consequence of failing to provide a requested document to the owner?
Suspension or revocation of the real estate license.
Can a license holder receive compensation from multiple parties in a real estate transaction?
No, unless all parties are fully aware and consent to it.
What is a violation when negotiating the sale of real property with someone already under contract with another broker?
Attempting to negotiate with someone who is already under exclusive agency with another broker.
How should a license holder handle earnest money or option money?
They should not deliver it until the offer is accepted and the acceptance is communicated to the other party.
What is the consequence of using a hand-written contract instead of a typed one in real estate transactions?
It may lead to legal issues or unenforceability of the contract.
What should a license holder do if there is a dispute over earnest money?
Seek legal advice or broker input.
What is the definition of “procuring cause” in real estate transactions?
The cooperating broker’s performance that leads to the sale or lease of the property.
Can a listing broker refuse to compensate a cooperating broker?
Yes, if it is determined that it was financially unfeasible or impossible for the listing broker to collect a commission in good faith.
What is the difference between agency and compensation in real estate?
Agency involves the representation of a client, while compensation is based on procuring cause rules and may not be linked to agency agreements.
