section 10 real estate contract law

Question 1

An important legal feature of a contract is
a. it represents a “meeting of the minds.”
b. it must use precise wording in a document.
c. it is not voidable.
d. it can be created only by an attorney.

Answer 1

a. it represents a “meeting of the minds.”

Question 2

According to contract law, every valid contract is also
a. void.
b. enforceable.
c. enforceable or unenforceable.
d. voidable.

Answer 2

c. enforceable or unenforceable.

Question 3

The guardian for a mentally incompetent party enters into an oral contract with another party to buy a trade fixture. This contract
a. does not meet validity requirements.
b. is possibly valid and enforceable.
c. must be in writing to be valid.
d. is valid but unenforceable.

Answer 3

b. is possibly valid and enforceable.

Question 4

A prospective homebuyer submits a signed offer to buy a house with the condition that the seller pays financing points at closing. The seller disagrees, crosses out the points clause, then signs and returns the document to the buyer. At this point, assuming all other contract validity items are in order, the status of the offer is
a. an accepted offer, therefore a valid contract.
b. an invalid contract.
c. a counteroffer.
d. an invalid offer.

Answer 4

c. a counteroffer.

Question 5

As part of a construction contract between a contractor and a buyer, the contractor promises to complete construction by November 20. This promise can be construed as
a. competency on behalf of the contractor.
b. mutual consent.
c. good faith.
d. valuable consideration.

Answer 5

d. valuable consideration.

Question 6

An unscrupulous investor completes a contract with a buyer to sell a property the investor does not own. The sale contract for this transaction
a. is voidable.
b. must be in writing.
c. is void.
d. is illegal yet potentially enforceable.

Answer 6

c. is void.

Question 7

A homeowner encourages an agent to aggressively persuade a buyer to purchase his house by overinflating historical appreciation rates. The agent and the seller agree that 25% annual appreciation would work, even though this figure is four times actual rates. The pitch succeeds, and the seller accepts the buyer’s resulting offer. This contract is
a. enforceable.
b. voidable.
c. void.
d. valid.

Answer 7

b. voidable.

Question 8

The statute of limitations requires that parties to a contract who have been damaged or who question the contract’s provisions
a. must act within a statutory period.
b. must select a specific, limited course of action for recouping their losses.
c. must arbitrate prior to taking court action.
d. must wait a statutory period before they may take legal action.

Answer 8

a. must act within a statutory period.

Question 9

The purpose of the statute of frauds is to
a. invalidate certain oral contracts.
b. require certain conveyance-related contracts to be in writing.
c. nullify oral leases and listing agreements.
d. eliminate fraud in real estate contracts.

Answer 9

b. require certain conveyance-related contracts to be in writing.

Question 10

A seller immediately accepts a buyer’s offer but waits eight days before returning the accepted document to the buyer. Meanwhile, the offer has expired. Which of the following is true?
a. The buyer is bound to the contract since it was accepted immediately.
b. The buyer has no obligations to the seller whatsoever.
c. The buyer may not rescind the expired offer.
d. The seller may sue for specific performance.

Answer 10

b. The buyer has no obligations to the seller whatsoever.

Question 11

A buyer agrees to all terms of a seller’s offer except price. The buyer lowers the price by $1,000, signs the form, and mails it back to the seller. At this point, the seller’s offer
a. is void.
b. becomes an executory contract.
c. becomes a counteroffer.
d. has been accepted.

Answer 11

a. is void.

Question 12

A buyer submits an offer to a seller. Two hours later, the buyer finds a better house, calls the first seller, and withdraws the offer. Which of the following is true?
a. The buyer may not revoke the offer in such a short period of time.
b. The first seller may sue the buyer for specific performance.
c. If the seller accepted the offer, the buyer must perform.
d. The original offer is legally extinguished.

Answer 12

d. The original offer is legally extinguished.

Question 13

Real estate contracts that are not personal service contracts
a. may be assigned.
b. are not assignable.
c. must be in writing.
d. are exempt from the statute of frauds.

Answer 13

a. may be assigned.

Question 14

Which of the following contracts must be in writing to be enforceable?
a. A parol contract.
b. A six-month lease.
c. A two-year lease.
d. An executory contract.

Answer 14

c. A two-year lease.

Question 15

A good example of a unilateral contract is
a. an option to purchase.
b. a listing agreement.
c. a personal services agreement.
d. a sale contract.

Answer 15

a. an option to purchase.

Question 16

A contract is discharged whenever
a. there is a cooling period.
b. both parties have signed it.
c. it is performed.
d. the parties agree to their respective promises.

Answer 16

c. it is performed.

Question 17

A contract may be defensibly terminated without damages if
a. it is abandoned by one party.
b. it is impossible to perform.
c. it is deemed to be valid.
d. both parties breach its terms

Answer 17

b. it is impossible to perform.

Question 18

A potentially enforceable agreement between two or more parties who agree to perform or not perform some act. If valid, the contract is enforceable, with limited exceptions.

Answer 18

Contract:

Question 19

Legal status of a contract that meets requirements of: competence of parties, mutual consent, valuable consideration, legal purpose, and voluntary good faith. A prerequisite for enforceability.

Answer 19

Valid:

Question 20

State laws declare that some contracts are enforceable only if they are in writing. Thus, while an oral contract may meet the tests for validity, if it falls under the laws requiring a written contract, the parties will not have legal recourse to enforce performance. An oral long-term lease and an oral real estate sales contract are examples of contracts that may be valid but not enforceable.

Answer 20

Unenforceable:

Question 21

An agreement that is null and cannot be enforced.

Answer 21

Void:

Question 22

An agreement that is subject to being nullified because a party to the agreement acted under some legal disability. Only the disadvantaged party can take action to void the contract.

Answer 22

Voidable:

Question 23

An item of tangible or intangible value, or one’s promise to do or not do some act which is used as an inducement to another party to enter into a contract.

Answer 23

Consideration:

Question 24

A law requiring certain contracts to be in writing in order to be enforceable. Examples are real property conveyances, listing agreements, and long term leases.

Answer 24

Statute of Frauds:

Question 25

A process that creates a contract. Acceptance is the offeree’s unequivocal, manifest agreement to the terms of an offer. The offer becomes a contract when the acceptance has been communicated to the offeror.

Answer 25

Offer and Acceptance:

Question 26

Any new offer or amended offer made in response to an offer.

Answer 26

Counteroffer:

Question 27

An express contract is one in which all the terms and covenants of the agreement have been manifestly stated and agreed to by all parties, whether verbally or in writing.

Answer 27

Express:

Question 28

An unstated or unintentional agreement that may be deemed to exist by implication because of acts or statements by any of the parties to the agreement.

Answer 28

Implied:

Question 29

An agreement in which only one party promises to perform, contingent on the other party’s performance of an optional action.

Answer 29

Unilaterial:

Question 30

A contract where both parties promise to perform in exchange for performance by the other party.

Answer 30

Bilateral:

Question 31

A completed agreement which enjoins one or both principal parties to perform certain actions in order for the contract to become fully executed.

Answer 31

Executory:

Question 32

the act of nullifying a contract.

Answer 32

Rescission:

Question 33

The valuable consideration necessary to make a contract valid must be
a. money.
b. something tangible.
c. something specifically offered in exchange for something else.
d. something of equal value with whatever is received in exchange.

Answer 33

c

Question 34

The necessary condition of mutual consent may be found lacking in a contract if
a. the two parties did not discuss every possible interpretation of the contract’s provisions.
b. the offer which was accepted is vague.
c. one party did not have the legal authority to sign the contract.
d. the agreement is unwritten.

Answer 34

b

Question 35

A contract that conveys an interest in real estate must
a. contain a legal description of the property.
b. be written on a form approved by the state bar association..
c. be either nuncupative or holographic.
d. be recorded within three days to be enforceable

Answer 35

a

Question 36

A party sells a summer cottage appraised at $100,000 to a stranger for $50,000. The seller’s family wants to challenge the validity of the sale contract. The most apparent weakness of the contract that they might be able to attack is the
a. illegality of the contract’s intent.
b. insufficiency of the consideration exchanged for the property.
c. lack of consent on the part of the seller’s family.
d. lack of good faith on the part of the buyer.

Answer 36

b

Question 37

An oral contract to sell mineral rights is performed by both parties. Six months later, the seller has second thoughts and wants to reclaim the rights under the Statue of Frauds. What is the likelihood that the seller will succeed?
a. Nil, because the Statute of Frauds is irrelevant to a contract that has been performed.
b. Good, because an oral contract to convey a real estate interest is unenforceable under the Statute of Frauds.
c. Good, because the contract is voidable.
d. Nil, because the buyer committed no fraud.

Answer 37

a

Question 38

How much time does a seller have to accept a buyer’s offer?
a. Forty-eight hours from the time of the offeror’s signing of the offer.
b. Twenty-four hours from the time of the offer’s delivery to the seller.
c. As long as the seller wants.
d. A “reasonable” time, or until the expiration date on the offer.

Answer 38

d

Question 39

A buyer submits an offer to a seller and then dies in a car accident. Before learning of the buyer’s death, the seller accepts the offer. Which of the following is true?
a. The seller can force the buyer’s estate to go through with the purchase.
b. The buyer’s death terminated the offer.
c. The seller must make a new offer with the same terms to the buyer’s heirs.
d. The buyer’s heirs have the option of enforcing the contract.
.

Answer 39

b

Question 40

Which of the following contracts can be assigned to another party?
a. An exclusive listing agreement.
b. An exclusive agency agreement.
c. A contract for the sale of a house.
d. An employment contract between a broker and a salesperson.

Answer 40

c

Question 41

An implied contract may be deemed to exist if
a. the parties do not disavow an express contract that has expired.
b. the parties act is if there is a contract.
c. an offering party does not receive written notice that the offer has been rejected.
d. the parties promise to perform their part of the agreement if the other party performs.

Answer 41

b

Question 42

Which of the following is an executory contract?
a. An expired lease.
b. A sale contract before closing.
c. recorded sale contract.
d. An option to buy after it is exercised.

Answer 42

b

Question 43

A bilateral contract is one in which
a. both parties promise to do something in exchange for the other party’s performance.
b. both parties receive equal consideration.
c. both parties agree to perform a service.
d. one party promises to do something if the other party performs first

Answer 43

a

Question 44

A homeseller signs a listing agreement with a broker and the next week decides not to sell and revokes the listing. Which of the following is true?
a. The seller has no contractual obligations to the broker.
b. The contract remains in full force until the expiration date.
c. The broker may have a claim for damages.
d. The seller cannot sign a listing agreement with another broker

Answer 44

c

Question 45

A breach of contract is
a. a termination of the contract by the mutual consent of the parties.
b. financial damage suffered by a party because another party has nullified a contract provision.
c. a lawsuit to force a party to discharge the contract.
d. the failure of a party to perform according to the terms of the contract.

Answer 45

d

Question 46

What is rescission?
a. The act of withdrawing an offer before it has been accepted.
b. The act of nullifying a contract.
c. The act of declaring a contract unenforceable.
d. The act of modifying the terms of an offer.

Answer 46

b or c

Question 47

In a suit for damages by reason of default, the damaged party may claim liquidated damages if
a. the contract stated a specific amount due to a damaged party.
b. the contract stated that a defaulting party could not profit from the contract.
c. the defaulting party owns property that can be foreclosed to pay the damages.
d. the contract stated that a damaged party could take legal action to enforce the contract.

Answer 47

a

Question 48

A landlord suddenly terminates a tenant’s lease in violation of the lease terms. The tenant takes action to compel the landlord to comply with the violated terms. This is an example of a suit for
a. rescission.
b. specific performance.
c. damages.
d. forfeiture.

Answer 48

b

Question 49

A contract may be defensibly terminated without damages if
a. it is abandoned by one party.
b. it is impossible to perform.
c. it is deemed to be valid.
d. both parties breach its terms.

Answer 49

b

Question 50

A contract is discharged whenever
a. there is a cooling period.
b. both parties have signed it.
c. it is performed.
d. the parties agree to their respective promises.

Answer 50

c

Question 51

A good example of a unilateral contract is
a. an option to purchase.
b. a listing agreement.
c. a personal services agreement.
d. a sale contract.

Answer 51

a

Question 52

Which of the following contracts must be in writing to be enforceable?
a. A parol contract.
b. A six-month lease.
c. A two-year lease.
d. An executory contract.

Answer 52

c

Question 53

Real estate contracts that are not personal service contracts
a. may be assigned.
b. are not assignable.
c. must be in writing.
d. are exempt from the statute of frauds.

Answer 53

a