Module 2 Flashcards
______ ____is the body of rules consisting of common law and statutory law that regulate the formation, interpretation, and enforcement of promises.
Contract Law
______ ____ is the term used to define written laws, usually enacted by a legislative body.
Statutory Law
______ ______ ___ is the collection of legal concepts that the colonists brought with them to North America from England.
English common law
United States contract law has its origins in ______ ________ ____.
English Common Law
The basic principles of contract law that apply to today’s real estate brokerage are based upon the concepts that are in …..
Restatements of the Law of Contracts
In real estate brokerage, ______ agreements and ______ agreements are the two most frequently used contracts.
listing
sale
Contract law is made up of both _______ law and ________ law.
common
statutory
Other contracts common to real estate brokerage are …..
options, mortgages, and land sale contracts.
In order for a contract to be valid, these four essential elements are required at the time of its creation:
- competent parties (the parties must be legally competent);
- mutual assent (also known as offer and acceptance);
- consideration (something of value); and
- legality of purpose (lawful object).
Competent parties requires the parties to the contract to be legally competent. Some of the issues involved in this required contract element are:
Age Criminal History (Felonies) Illiteracy Identifiable Parties Mental Capacity Legal Authority
also referred to as a meeting of the minds and sometimes mutual consent.
Mutual assent
_________ _________ is demonstrated by the offeror making the offer and the offeree accepting the offer; it’s a clear and unequivocal offer and acceptance with an underlying meeting of the minds.
Mutual assent
The _________ is the party making the offer, and the _______ is receiving the offer.
Offeror
offeree
to be enforceable in what form must a contract be presented?
written
_______ is a legal concept that applies to the law of contracts. Contracts must be supported by consideration, or the contract will be void.
Consideration
________ must be present in every contract and can be an exchange of money, services, promises, negotiable instruments, personal property, the grants of rights, or the forbearance to act.
Consideration
________ __ ________ means the purpose or object of the contract is legal and enforceable; promise, intent and content must be lawful; if illegal, the contract is void – cannot contract to break the law.
Legality of Purpose
__________ is the contract element that requires the object of the contract to be legal.
Legality of Purpose
If a contract is created for a legal purpose but that purpose then becomes illegal before the contract is carried out what happens to the contract?
the contract becomes void
Contracts are classified as:
Express or Implied
Unilateral or Bilateral
Executed or Executory
An ___________ contract is one having the necessary contract elements (competent parties, mutual assent, consideration, lawful object) explicitly stated by words, either written or oral. _________ contracts are not implied or left to inference due to the circumstances surrounding the creation of the contract.
express
All written contracts are ________ contracts
express
_______ contracts are not created by an oral or written agreement, they must be deduced from the actions of the parties.
implied
In contrast to express contracts, contracts can be created by implication. These contracts are called _______ contracts.
implied
An _________ contract is one expressed by words, either oral or written. An ________ contract is one deduced from the actions of the parties.
express
implied
True or False
The Statute of Frauds requires that all real estate matters be in writing, except a rental of one year or less.
True
Contracts with mutual promises are known as ________
bilateral
An important feature of a ________ contract is that each party can enforce the contract against the other.
bilateral
In real estate brokerage, the most common type of ________ contract is the real estate sale agreement.
bilateral
a ________ contract is one where only one party makes a promise without receiving any promise from the other party to the contract.
unilateral
True or False
A real estate sale agreement is a unilateral contract.
false
A real estate sale agreement is a bilateral contract because the parties exchange mutual promises. In a unilateral contract, only one party makes a promise.
An ________ contract is one that has not yet been fully executed (performed) by the parties.
executory
_________ and ________ refer to the stage of a contract in terms of performance by the parties. Performance refers to the act of doing the things required by a contract.
Executed
Executory
An _________ contract is one that has been fully performed by the contracting parties.
executed
An oral lease for two years is not enforceable because of the ________ of ________
Statute of Frauds.
If a person dies prior to the notification of the acceptance of an offer, the contract is ________
void.
If only one party makes a promise, the contract is _______
unilateral.
The ______ of ______ requires contracts for real estate to be in writing to be enforceable.
Statute of Frauds
Which of the following is NOT a necessary element in the formation of a contract?
Offer
Performance
Consideration
Acceptance
Performance
A felon can do all of the following EXCEPT
vote while incarcerated.
make a will.
buy and sell real property.
marry.
vote
An agreement between competent parties and based upon legal consideration that creates legally enforceable duties and obligations.
what is this statement an example of?
A Contract
Negotiating a contract with a minor can be legally accomplished through the minor’s _______ _______.
legal guardian
SHOULD or SHOULD NOT?
In selling property to a corporation, the seller ________ verify the corporate resolution authorizing specific persons to sign for the corporation.
should
TRUE or FALSE
A contract signed by an obviously intoxicated person can be rescinded.
True
An __________ contract is one that has not yet been fully performed.
executory
CAN or CANNOT?
An offeror _______ revoke an offer after the offeree has communicated that they have accepted it.
cannot
All of the following are essential elements to a lawfully enforceable contract EXCEPT
consideration.
recordation.
legality of object.
legal competency.
recordation
The offeror can withdraw the contract at any time before the offeree’s _________ of the contract is communicated.
acceptance
CAN or CANNOT?
A limited partner of a limited partnership ______ enter into contracts on behalf of another or for the limited partnership. The general partner in the limited partnership is presumed to have the authority to enter into contracts for the partnership.
cannot
Which of the following statements about competent parties is TRUE?
- An individual who is legally drunk has the capacity to sign an agreement to purchase real estate.
- A 17 year old married boy is not considered the age of majority under contract law.
- An illiterate person can enter into a written contract.
- A felon cannot buy real property.
-An illiterate person can enter into a written contract.
TRUE or FALSE
A 17 year old married person in Oregon is legally bound under contract law.
True
Felipe obtained a signed offer and an earnest money check from Jack, a qualified buyer. Before Felipe could present the offer to the seller, Jack called to say that he was being transferred out of town and wanted to withdraw his offer. In this case, the buyer
- is within his right to withdraw his offer.
- must forfeit a part of his earnest money deposit.
- could be successfully sued for specific performance.
- must forfeit his entire earnest money deposit.
is within his right to withdraw his offer.
Which of the following do NOT need to be in writing?
A listing agreement.
A lease for one year or longer.
A rental agreement for less than one year.
An offer to purchase real estate.
A rental agreement for less than one year.
Which is not a requirement of a valid contract?
Offer and acceptance.
Consideration expressed in monetary terms.
Lawful purpose.
Competent parties.
Consideration expressed in monetary terms.
The buyer has the right to withdraw the offer before it is _______ by the seller.
accepted
Consideration does not have to be expressed in ______ terms.
monetary terms
Consideration does not have to be expressed in ______ terms.
monetary terms
A representation that is designed to give a false impression is a _______ _________
false representation.
A licensee who does not disclose knowledge of material facts or defects that could be observed by an ordinary examination of a property is guilty of misrepresentation by ________
Omission
TRUE or FALSE
When a contract is entered into because a party relied on a misrepresentation, the contract is voidable at the option of the party to whom the misrepresentation was made.
True
________ means to give sufficient reason to take legal action.
Actionable
________ means to give sufficient reason to take legal action.
Actionable
Intentional ________ is a purposeful misstatement of a material fact that is designed intentionally to deceive.
Intentional Misrepresentation
Intentional _______ is a purposeful concealment of a material fact.
Intentional Concealment
Negligent ________ is an unintended misstatement that the agent should have known to be a misstatement.
Misrepresentation
Negligent _________ is an unintended omission that the agent should have known not to omit.
Omission
_____ is a licensee boasting about property’s benefits
Puffing
________ is a misstatement or concealment of fact.
Misrepresentation
__________ is the act of hiding something. In general, concealment of a material fact is actionable against the concealing party.
Concealment
________ is the threat of economic or physical harm leading a person to enter into a contract. The threat of harm may be against the contracting party or against a third party.
Duress
________ is the threat of economic or physical harm leading a person to enter into a contract. The threat of harm may be against the contracting party or against a third party.
Duress
________ ________ usually arises when one party can dominate the free will of the other party because of the relationship that exists between them.
Undue influence
________ ________ usually arises when one party can dominate the free will of the other party because of the relationship that exists between them.
Undue influence
A mistake of a material fact by both parties is known as a _______ _________
mutual mistake.
A ______ contract is one that is legally binding and enforceable
valid
An ________ contract is a contract that has not yet been fully carried out because one or both parties still have some contract conditions to perform.
executory
A ______ contract is unenforceable at the time of formation or upon the discovery of a nullity. For example, a contract formed for an illegal purpose is ____ at the time it is formed because contracts must have a legal purpose.
void
True or False
As long as the purpose of a contract is legal at the time of formation, the contract remains valid if the purpose becomes illegal.
False
A contract to perform an act that was legal when formed but then became illegal before it could be performed is a void contract.
True or False
As long as the purpose of a contract is legal at the time of formation, the contract remains valid if the purpose becomes illegal.
False
A contract to perform an act that was legal when formed but then became illegal before it could be performed is a void contract.
Simply put, _____ means if there is a claim, then it must be acted on in a timely manner.
laches
The ________ period in a real estate contract is the period between signing the contract and closing.
executory
________ makes a voidable contract fully enforceable.
Ratification
A _______ contract is one that exists with a defect that allows one party to declare the entire contract void without any adverse legal effect. The defect can be in the formation of the contract or exist for some other reason
voidable
_________, the opposite of ratification, makes a voidable contract unenforceable.
Rescission
___________ puts the contracting parties back into the same positions they were in before they entered into the contract, at least as far as is practicable.
Restitution
True or False
Void means a contract never existed; voidable means a contract can be made void.
True
True or False
A contract is unenforceable if it becomes impossible to complete.
True
________ of ________ are an example of time limits within which suits must be filed.
Statutes of limitations
A party to a contract can be barred from asserting rights under the contract if too much time passes. This barring of rights is known as the __________ of ________.
Doctrine of Laches
The _______ of ________ restricts the time that an injured party or a party who questions a contract can act; the party must act within the statutory period.
statute of limitations
A _________ is an act or event, the happening or non-happening of which affects the duty to perform the contract. Conditions can limit, modify, or terminate a contractual obligation.
condition
A ___________ is an event that is uncertain to happen.
contingency
A contract is ______ if it cannot be determined what is stated in the contract.
vague
A contract is __________ when terms are present, but can be interpreted to have different meanings than intended by the author. If the provision is deemed ambiguous, then the true meaning will be a question for a court.
ambiguous
A contract is ___________ if the meaning of the contract cannot be fully ascertained because terms are missing.
indefinite
A suit for _________ is a legal process that presents a contract to the court for the court’s interpretation.
reformation
___________ deals with the transfer of rights
Assignment
___________ deals with the transfer of duties
Delegation
“This house has the best view in the entire city” is an example of
- misrepresentation by omission.
- puffing.
- fraudulent misrepresentation.
- misrepresentation by commission.
-puffing.
When the subject matter of a contract was legal when the contract was entered into, but a law is passed that makes it illegal, then at the time the law becomes effective the contract is
voidable.
valid, since it was valid at the time of formation.
ratified.
void.
void.
Dan has a contract to buy Martha’s house, but two days before closing the house is destroyed by fire. The legal basis for Dan’s right to refuse to proceed with the purchase is
fraud in the execution.
laches.
breach of contract.
impossibility of performance.
impossibility of performance.
A real estate licensee can be guilty of misrepresentation by
A- direct statements.
B- acts of omission, such as failure to disclose vital information.
B only
A only
Both A and B
Neither A nor B
Both A and B
True or False
A licensee can be found guilty of both acts of omission or direct statements (acts of commission)
True
The following statement: “This house has insulation that exceeds the current building code minimum requirements” when in fact that house does not even meet the minimum requirements is
- puffing.
- a misrepresentation.
- coercion.
- fraud in the execution.
a misrepresentation.
Representing a material fact to be true when it isn’t true is a ___________.
misrepresentation
Which statement is correct?
- Undue influence is coercion.
- Undue influence is undue persuasion, usually due to the relationship that exists between the parties where one party has the ability to dominate the free will of the other. -Undue influence results when one party threatens physical or economic harm in order to force another party to enter into a contract.
- Undue influence is the same as duress.
Undue influence is undue persuasion, usually due to the relationship that exists between the parties where one party has the ability to dominate the free will of the other.
Which statement is the definition of fraud in the execution of a contract?
- Inducing a party to sign a contract by misrepresenting the essential terms of the agreement.
- Making statements that are classified as “puffing” prior to the signing of the contract.
- Anticipatory breaches that ratify a previously redundant revocation of novation.
- Actions by a party to a contract that are fraudulent once the contract has been executed.
Inducing a party to sign a contract by misrepresenting the essential terms of the agreement.
______ means it’s a nullity - never legally existed.
Void
__________ means the contract cannot be enforced against either party.
Unenforceable
A contract that has no force or legal effect in law is
A. void
B. voidable
C. unenforceable
A and B only
B and C only
C only
A and C only
A and C only
A voidable contract is
- invalid and the contract cannot be enforced by either party.
- void because one party to the contract has an unfair advantage over the other party.
- enforceable but is subject to rescission by one of the parties to the contract.
- illegal because all of the elements to create the contract are not present.
enforceable but is subject to rescission by one of the parties to the contract.
A voidable contract is enforceable but is subject to ________ by one of the parties to the contract. Voidable means one or both of the parties can void or “rescind” the contract.
rescission
Which is not a defense to fraud in the execution?
- The complaining party is impaired physically (such as being blind).
- The complaining party did not read the document prior to signing.
- The complaining party is illiterate.
- The complaining party is impaired mentally.
The complaining party did not read the document prior to signing.
Which of the following are necessary to prove that a misrepresentation constituted fraud?
1) That the person making the misrepresentation knew that the statement was false and made the statement with the intent to deceive the other party
2) That the statement was regarding a material fact
3) That the party to whom the misrepresentation was made acted upon it to his detriment
4) That the statement was in writing
1, 2, and 3 only
1, 2, and 4 only
2, 3, and 4 only
1, 3, and 4 only
1, 2, and 3 only
_________ occurs when a new party is substituted for an original party to a contract.
Novation
Which statement is correct?
- Novation is the opposite of assignment and delegation.
- Novation refers to the ability to void a contract due to problems in the formation.
- Novation does not relieve the original party of their contract duties and responsibilities.
- Novation occurs when a new party is substituted for an original party to a contract.
Novation occurs when a new party is substituted for an original party to a contract.
A licensee can be guilty of misrepresentation by
commission only.
commission and omission.
omission only.
neither commission nor omission.
commission and omission.
_________ is withholding something that is material;
Omission
_________ is lying about something that is material.
Commission
A licensee can be guilty of misrepresentation by
- commission only.
- commission and omission.
- omission only.
- neither commission nor omission.
commission and omission.
George applied undue influence to get his mother to agree to sell him her home at half its market value. The contract is
- voidable at the option of George’s mother.
- voidable at the option of George or his mother.
- invalid.
- voidable at the option of George.
voidable at the option of George’s mother.
Are Personal service contracts assignable?
No
Which statement is false?
1) Contract rights and duties may be assigned and delegated unless specifically prohibited by the contract.
2) If a contract is subject to the Statute of Frauds, an assignment of the contract must be in writing.
3) Personal service contracts are assignable.
4) A novation occurs when a third party has been substituted for an original party to a contract, thereby releasing the original party from further obligation.
Personal service contracts are assignable.
A ___________ is an event, not certain to occur, which must occur unless its nonoccurrence is excused before performance under a contract becomes due.
condition
A _________ is an event that may occur, a possibility.
contingency
the term ____________ relates more to the event itself, while the term __________ relates more to the existence of an obligation that ripens due to the happening or non-happening of the event.
contingency
condition
True or False
Most contingencies will be added to the real estate sale agreement for the benefit of the seller.
False
A condition _________ is a contract condition required to occur before it ripens a contract duty.
precedent
A condition __________ is a contract condition that requires the contracting parties to perform simultaneously.
concurrent
A condition __________ is a future event that is to occur after the formation of the contract that can extinguish, modify, or discharge the duty of a party to perform.
subsequent
True or False
The Time Is of the Essence clause is inserted to advise the parties that a reasonable effort must be made to fulfill an obligation within a reasonable time of the date specified
False
the correct statement would be
“Time Is of the Essence” is inserted into the contract to advise the parties that an obligation or event must be fulfilled by the date specified.
True or False
A contracting party can refuse to take the steps necessary to satisfy the terms of a contingency, thereby voiding the contract without penalty.
False
What are the 4 basic drafting questions agents should ask themselves when carefully drafting a contingency or condition as part of a contractual agreements?
What is the condition needing the contingency?
Who must act?
What is to be done?
When must the contingency be satisfied and how?
True or False
The standard-form real estate sale agreement contains all of the possible contingencies that could arise in a real estate transaction.
False
The standardized real estate sale agreement does NOT contain all of the possible contingencies that could arise in a real estate transaction, which means licensees will need to learn to draft contingencies unique to their clients.
A ________ of contract occurs when one or more parties to a contract fail to perform or incorrectly perform a contract duty.
breach
True or Flase
A breach of contract occurs when one or more parties to a contract fail to perform or incorrectly perform a contract duty.
True
The more material the breach or substantial the default, the more likely the breach will be considered ________
total
_________ ________ is the declaration by a party to a contract that they do not plan to perform the contract before their performance is required.
Anticipatory repudiation
True or False
When a contracting party, before performance is due, indicates an intention to not perform, the other party to the contract may sue for total breach of contract without waiting for the breach to occur.
True
In oregon the pleading of inconsistent remedies is known as…..
pleading in the alternative
When a total or partial breach occurs, the non-breaching party can ask for __________.
damages
_________ damages are damages specified in advance as damages for a breach of contract.
Liquidated
________ damages are the damages stated in the contract that are due to the damaged party.
Liquidated
_________ means cancellation, destruction, or unmaking the contract and the return of deposits, if any. Rescission can be accomplished by one of the parties unilaterally rescinding an agreement or by a court action.
Rescission
________ means restoring the parties to their relative positions before entering into the contract. Usually, each party returns to the other that which was received under the contract.
Restitution
_________ __________ is a remedy granted by the court when the contract is breached and damages for the contract breach are not equitable to the promised performance.
Specific performance
______ of ______ - a court that is authorized to apply principles of equity, as opposed to law, to cases brought before it.
court of equity
When the court asks the breaching party to refrain from doing a specific act, it is known as issuing an ________.
injunction
__________ of _________ is a remedy provided by courts of equity. This remedy has specific application to situations where an agreement incorrectly expresses the true agreement. The court, in essence, rewrites the agreement for the parties to express their actual and intended agreement.
Reformation of Contract
______ liabilities are the obligations and duties assumed by the parties to the contract.
Contract
A _______ is a wrongful conduct by one person that causes injury to another. It is a French word meaning wrong.
tort
_______ can be an issue for the portion of the contract involving the partial breach.
Damages
A breach of _______ occurs when one or more parties to a contract fail to perform or incorrectly perform a contract duty.
contract
The more material the breach or substantial the default, the more likely the breach will be considered _______.
total Breach
If the breach is total, the contract can be terminated. If the contract is terminated, _______ are the remaining issue.
damages
If the breach is ________, the remaining contract duties are not discharged and the parties must continue with the performance of the remaining terms.
partial
True or False
Untimeliness in performance would represent a partial breach and further performance would be required.
True
Generally, untimeliness in performance does not result in ______ _______, unless the circumstances of timely performance are implied, or a time is of the essence clause is in the contract.
total breach,
Untimeliness in performance would represent a ________ breach and further performance would be required.
partial
Anticipatory Breach, also known as Anticipatory _________
Repudiation
________ ________ is the declaration by a party to a contract that they do not plan to perform the contract before their performance is required.
Anticipatory repudiation
Yes or No
In the state of Oregon may a plaintiff plead inconsistent remedies.
Yes
Name 3 of the 5 available remedies for breach of contract.
suit for damages (actual, liquidated, and punitive); attorneys' fees; rescission and restitution; reformation of contract; and specific performance.
Define “Pleading in the alternative”
When, in Oregon, a plaintiff pleads inconsistent remedies.
True or False
When a total or partial breach occurs, the non-breaching party can ask for damages.
True
Define
actual damages.
to place the injured party, insofar as monetary compensation is possible, in the same position they would have been in had the contract been fully performed.
_________ damages are for the actual loss caused by the breach
Recoverable
_______ damages are damages specified in advance as damages for a breach of contract
Liquidated
True or False
Most of the preprinted residential real estate sale agreements used in Oregon include a provision that the earnest money deposit given by the buyer will be released to the seller as liquidated damages if the sale agreement is breached.
True
_______ damages are the damages stated in the contract that are due to the damaged party.
Liquidated
_______ damages usually arise when the conduct of a party is bad, egregious, or unconscionable in such a way that the court finds it desirable to punish the offending party.
Punitive
In real estate related contracts, _______ damages arise out of tort actions such as fraud, negligent misrepresentation, intentional misrepresentation, or interference with economic relationships.
punitive
the following is an explanation for ______ performance…
A legal procedure or action brought by either the buyer or seller to enforce the terms of an agreement for purchase and sale.
Specific
You would likely find a liquidated damages clause in a _____ ______ _____ agreement.
real estate sale
True or False
The more material the breach or more substantial the default, the more likely the breach will be total.
True
True or False
The contract is terminated when there is a total breach.
True
True or False
Total breach means that the other party is obligated to continue to perform.
False
True or False
In the case of total breach, the major issue will be the amount of damages.
True
Total breach does not mean that the other party is obligated to perform. Instead, it means that the contract can be terminated. In the case that the contract is terminated, the remaining issue to resolve is that of _______ owed.
damages
The amount predetermined as the total compensation a party will receive upon the breach of a contract is known as
liquidated damages.
_________ damages are defined as the amount predetermined as the total compensation a party will receive upon the breach of contract. While these liquidated damages are necessarily forseeable due to the fact that they are specified in advance, we would not call them foreseeable damages.
Liquidated
True or False
the purpose of paying damages is to place the injured party in the same position he would have been had the contract been fully performed.
True
True or False
the injured party has no duty to mitigate damages.
False
Specific performance is
a legal procedure brought by either buyer or seller to enforce the terms of a real estate contract.
_________ agreement is an employment contract between a specific principal broker and a specific property owner (the seller of the property).
Listing
A _______ agreement is a personal service contract whereby a property owner hires a specific principal broker and is NOT assignable to another principal broker.
listing
these components make up what type of contract?
- starting and ending dates of the contract
- asking price for the property, the types of financing the owner will accept
- the amount of commission to be paid to the principal broker
- the right to install a For Sale sign and lock box on the property
- permission to advertise the property for sale and to publish interior and exterior photographs of the property on the Internet
- the owner’s consent to the rules and provisions of the MLS
Listing Agreement
Name the Fiduciary duties that apply to the listing agreement.
Accounting, Care, Confidentiality, Obedience, Diligence, Disclosure.
What three things independent of fiduciary duties does the listing broker owe to the customer.
honesty
care
disclosure
The listing agreement is not valid until it is signed by all property owners and the ________ _______.
principal broker
The principal broker is the agent of the ______ ______ and the broker is an agent of the _______ _______.
property owner
principal broker
Finish the statement.
The listing agreement is an employment contract between a specific……….
principal broker and a specific property owner (the seller of the property).
What type of contract is a Lisiting agreement, and is it assignable.
personal service contract
NO
Name there of the 6 main components of a listing agreement
asking price
type of financing the owner will accept
amount of commission to be paid to the principle broker
right to install a for sale sign and lock box
permission to advertise the property for sale and publish interior and exterior photos of property on internet
owner’s consent to rules and provisions of MLS
Name the four different types of listing agreements
Open
exclusive agency
exclusive right to sell
Net
The _______ listing allows the seller to employ any number of agents at the same time. However, the seller will only owe a commission to the agent who sells the property (the procuring cause of the sale).
open
________ _________ , as defined by the National Association of REALTORS®, is “the uninterrupted series of causal events that leads to a successful transaction.” It is the way to determine disputes about who deserves a real estate commission for causing a sale.
Procuring Cause
______ listing - non-exclusive; no stated expiration; procuring cause gets the commission; no commission if the seller procures the customer.
Open
________ Agency Listing - exclusive excepting the owner; must expire; the principal broker gets the commission unless sold by the owner.
Exclusive
_______ right to sell listing, the seller employs just one principal broker. The principal broker earns their commission if the property is sold by another principal broker, the seller, or the listing principal broker.
Exclusive
A _______ principal broker is a principal broker who shares in (“cooperates” in) the commission owed to a listing principal broker. When the listing principal broker refers to the cooperating broker, the cooperating broker is the buyer’s broker.
cooperating
__________ are annual crops or the right to harvest and the profits associated therewith.
Emblements
“Police power” is the government’s right to……..
regulate the use of real property in the public interest; to zone property.
