PSI Exam Prep: Contracts

Question 1

it requires that certain types of contracts, such as for a property ownership transfer, be in writing to be legally enforceable and to prevent injury from fraudulent conduct.

Answer 1

The statute of frauds

Question 2

What are the 5 characteristics that make a contract valid?

Answer 2

Offer and acceptance
Consideration
Legally competent parties
Legal purpose
Made voluntarily

Question 3

this occurs when the parties enter into an agreement voluntarily with full understanding of contract terms.

Answer 3

Offer and acceptance

Question 4

it is something of legal value offered by one party and accepted by another,

Answer 4

Consideration

Question 5

are those who have the legal and mental capacity to enter into a contract

Answer 5

Legally competent parties

Question 6

it means that the contract results in a legal outcome.

Answer 6

Legal purpose

Question 7

it means the parties entered into the agreement voluntarily.

Answer 7

A voluntary contract or made voluntary

Question 8

it means that one part or section of a contract is unenforceable, while the rest of the contract is enforceable

Answer 8

Severability

Question 9

When one party of the contract decides to terminate it

Answer 9

unilateral rescission

Question 10

seeking monetary compensation to make up for any harm caused.

Answer 10

sue for damages

Question 11

it seeks to force a party to make good on the promises made in some way.

Answer 11

specific performance

Question 12

limits buyer damages to a return of the earnest money if the seller breaches the contract.

Answer 12

liquidated damages

Question 13

All of the contract obligations have been met

Answer 13

Contract discharge

Question 14

generally means that one of the parties ends the contract before it’s fully performed

Answer 14

Contract termination

Question 15

generally results from an operation of law, such as breach of contract, destruction of the object of the contract, etc.

Answer 15

Contract rescission (cancellation)

Question 16

it means to transfer contractual rights or duties to a new party. The original party is usually liable if the new party do not meet the contract obligations

Answer 16

Assignment

Question 17

it occurs when one contract or party(ies) is substituted for another.

Answer 17

Novation

Question 18

UETA stands for

Answer 18

Uniform Electronic Transactions Act

Question 19

it means that both parties faithfully agree to perform responsibilities within the time limits of the contract.

Answer 19

“Time is of the essence”

Question 20

it specifies that any dispute arising under the contract shall be determined in accordance with the law in a particular jurisdiction.

Answer 20

Choice of law

Question 21

means one or both parties commit to compensate the other for any harm, liability, or loss arising out of the contract.

Answer 21

Indemnification

Question 22

it define a condition or action that a party must meet in order to not be in breach of contract.

Answer 22

Contingency clauses

Question 23

it is an addition to an existing document, such as an offer to purchase. It adds terms not addressed in the main body of the contract form.

Answer 23

addendum

Question 24

is a change to an existing contract between parties. It changes one or more of the original contract terms. For example, if the closing date must be changed, or the buyer decides she wants the curtains to remain and the seller agrees (after the original contract noted the seller was taking them), the parties can execute an amendment outlining the additional agreement between them.

Answer 24

amendment

Question 25

When does a contract becomes binding?

Answer 25

once it is signed

Question 26

If there is not a specific date in the contract, it should be done….

Answer 26

within “reasonable time”. Usually courts favor the buyers

Question 27

“I will pay x price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer to y price.”

Answer 27

An escalator offer

Question 28

Should licensees present all of the offers even after an offer has been accepted?

Answer 28

Yes, all of them need to be presented

Question 29

Which contingency is the riskiest of them all?

Answer 29

Home sale contingency

Question 30

Who decides how much is for the earneast money?

Answer 30

Usually, the buyer

Question 31

it occurs when all parties have signed a given contract

Answer 31

Acceptance

Question 32

it occurs when the accepted offer is delivered.

Answer 32

Binding acceptance

Question 33

it is a contractual shift of liability and obligations off of a given party.

Answer 33

indemnification clause

Question 34

it states the time frame in which a party can file a lawsuit relative to the contract.

Answer 34

The statute of limitations

Question 35

specifies that any contract disputes will be settled through this means, rather than through the court system.

Answer 35

Arbitration Clause

Question 36

What’s the role of the mortgage contingency in a sales contract?

Answer 36

Document the type of and timeline for financing, and outlines what to do if financing falls through.