Real Estate Course Chapter 11

Question 1

Regarding the parties in a contract, novation is the substitution of a new party for the original one.

Answer 1

The statement is TRUE. The effect of novation is to discharge the original party from the obligation.

Question 2

Valuable consideration is a promise that cannot be measured in terms of money, such as love and affection.

Answer 2

The statement is FALSE. Valuable consideration is money or a promise of something that can be measured in terms of money.

Question 3

In the case of a contract, obligation, or liability based on a written instrument, the statute of limitations designates that the terms of a written contract may be enforced for a period of ten years.

Answer 3

FALSE. The statute of limitations designates that the terms of a written contract may be enforced for a period of five years.

Question 4

Mutual assent refers to the making and acceptance of an offer.

Answer 4

The statement is TRUE. There must have been a meeting of the minds between parties, meaning they must reach an agreement on all terms in the contract.

Question 5

Brokers and sales associates should NOT prepare deeds, mortgages, or promissory notes

Answer 5

TRUE

Question 6

One exception to the Statute of Frauds concerns when an oral contract has been formed and the buyer has paid a part of the purchase price and then has either taken possession of the property or made some improvements to the property.

Answer 6

The statement is TRUE. There is one other exception to the Statute of Frauds: when both parties have fully performed as promised, in which case the resulting legal relationships are precisely the same as those that would have existed had the contract been in writing.

Question 7

An implied contract is one in which some or all of the obligations or conditions of a contract are NOT stated expressly.

Answer 7

TRUE

Question 8

When a wronged party in a breached contract sues for compensatory damages, it is to have the courts force the other party to perform as the contract specifically states.

Answer 8

The statement is FALSE. Specific performance is when an injured party sues to have the courts enforce the terms of a contract. A suit for compensatory damages is a suit that seeks money damages.

Question 9

In an option contract the optionor has an exclusive right to buy the property within a specified period.

Answer 9

The statement is FALSE. In an option contract the optionee (NOT the optionor) has the exclusive right to buy the property within a specified period for a specified price and terms.

Question 10

An option contract is a bilateral contract

Answer 10

False

Question 11

A contract specifies the amount of money that must be paid if the buyer defaults. Which remedy for breach does this describe?

Answer 11

LIQUIDATED DAMAGES

Question 12

What is the statute of limitations (in years) for parol contracts?

Answer 12

FOUR

Question 13

What does Florida’s Homeowner Association Law require of sellers who own property subject to a mandatory homeowners’ association?

Answer 13

THE SELLER MUST PROVIDE THE BUYER WITH A DISCLOSURE SUMMARY REGARDING THE ASSOCIATION.

Question 14

What is the purpose of the property tax disclosure?

Answer 14

CAUTION BUYERS THAT THEY CANNOT RELY ON THE SELLER’S PROPERTY TAX HISTORY AS AN INDICATION OF BUYER’SFUTURE PROPERTY TAX BILL

Question 15

Which remedy for breach of contract requests the courts to force the other party to proceed as the contract states?

Answer 15

Specific Performance

Question 16

What type of listing is given to a broker in which commission is promised to the listing broker, provided the owner does NOT find the buyer?

Answer 16

The answer is EXCLUSIVE-AGENCY LISTING. A seller gives an exclusive-agency listing to one broker who handles the transaction. The seller reserves the right to sell the property without paying a commission.

Question 17

A buyer has breached a real estate sale contract. The seller wants to recover damages in excess of the earnest money deposit. Which remedy for breach should the seller use?

Answer 17

COMPENSATORY DAMAGES. The party bringing suit seeks an amount of money equal to the extent of loss suffered (compensatory damages).

Question 18

Which party is the optionor in an option contract?

Answer 18

Property Owner

Question 19

Which element is NOT required of a valid real estate contract?

Answer 19

ACKNOWLEDGMENT

Question 20

Relevant to the Florida Energy Efficiency Rating Act, what must be done at close?

Answer 20

BUYERS MUST BE GIVEN AN INFORMATION BROCHURE NOTIFYING THE BUYER OF THE RIGHT TO CONDUCT AN ENERGY-EFFICIENCY RATING ON THE STRUCTURE.

Question 21

Within what period of time must the seller be given a copy of a written listing agreement?

Answer 21

24 hours

Question 22

Who must receive the lead-based paint disclosure?

Answer 22

TENANTS AND BUYERS OF ALL RESIDENTIAL PROPERTY BUILT PRIOR TO 1978.

Question 23

Which information must NOT be included in a listing agreement?

Answer 23

Automatic renewable clause

Question 24

The parties in a real estate sale contract are BEST described as the

Answer 24

VENDOR AND VENDEE

Question 25

Which court case made clear that material defects that affect the value of residential property must be disclosed to prospective buyers?

Answer 25

JOHNSON V. DAVIS.

Question 26

Which law specifies that contracts concerning real property must be in writing and signed by the parties bound to the agreement?

Answer 26

STATUTE OF FRAUDS

Question 27

When all parties to a contract have completely performed all obligations and promises contained in the contract, what type of contract is it?

Answer 27

EXECUTED

Question 28

An offer is terminated when any of the following happens:

Answer 28

``` WILD CARD W - withdrawal of offeror I - insanity L - Lapse of time D - Death ``` C_ Counteroffer A - Aceptance R - Rejection D - Destruction of the property

Question 29

What are the two types of consideration?

Answer 29

Valuable consideration - money | Good consideration - love or affection

Question 30

What are the four essential elements of a valid contract?

Answer 30

``` COLC C - competent parties O - offer and acceptance (mutual assent) L - Legal purpose C - Consideration ```

Question 31

What is a "void contract?"

Answer 31

It does not meet meet all of the required elements of a valid contract and therefore, has no legal effect

Question 32

What is a "voidable contract?"

Answer 32

A voidable contract is a contract, but because of the manner or method in which it was brought about, one of the parties is permitted to avoid any contractual duties. A minor's contract is voidable.

Question 33

A contract is terminated when any of the following happens:

Answer 33

``` PMILBB P-performance M-mutual recission I-Impossibility of performance L-Lapse of time B-Bankruptcy B-breech ```

Question 34

What is an "open listing?"

Answer 34

Seller can use many brokers. Only pays those who bring him a client who buys the property. (My FSBO arrangement).

Question 35

What is an exclusive-agency listing?

Answer 35

Typical real estate deal

Question 36

What is a "net-listing?"

Answer 36

An exclusive-agency listing can also be a net-listing. Seller agrees to sell a property for a stated amount (seller's net). The broker retains the proceeds above this amount as commission.