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real estate study notes > SU # 53__Purchase Agreements > Flashcards

SU # 53__Purchase Agreements Flashcards

1
Q

What is the difference between a void contract and a voidable contract?

A

A void contract is an agreement that does not meet the tests for validity, and therefore is no contract at all.

A voidable contract is one which initially appears to be valid, but is subject to cancellation by a party to the contract who is believed to have acted under some kind of disability.

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2
Q

What is the difference between an express contract and an implied contract?

A

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

An implied contract is an unstated or unintentional agreement that may be considered to exist when the actions of any of the parties suggest the existence of an agreement.

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3
Q

What are the five criteria of a valid contract?

A 
Competent parties
Mutual agreement
Lawful objective
Consideration
In writing
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4
Q

When must a suit for damages be initiated?

A

The suit must be initiated within the time period allowed by the Statute of Limitations.

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5
Q

List five provisions typically found in Illinois sales contracts?

A 
Identification of parties
Legal description
Personal property provision
Consideration
Terms of payment
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6
Q

What does “time is of the essence” mean?

A

This phrase emphasizes the requirement that events related to the contract must be performed on time.

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7
Q

What is a right of first refusal?

A

The right of a person to have the first opportunity to purchase or lease a property.

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8
Q

What is a letter of intent?

A

A letter of intent is really an agreement to agree. It outlines the terms between parties who have not formalized an agreement into a contract.

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9
Q

A promise by one party to act or perform in a specified manner provided the other party acts or performs in the manner requested is known as:

An offer

A contract

Good consideration

Valuable consideration

A

An offer

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10
Q

According to contract law, every valid contract is also:

void.

enforceable.

enforceable or unenforceable.

voidable.

A

enforceable or unenforceable.

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11
Q

A contract in which the party or parties have not completed all acts under the contract is known as:

bilateral

unilateral

executory

executed

A

executory

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12
Q

A contract to commit an illegal act is:

Legal

Void

Okay, if there are two witnesses

Okay if it is written and contains the signatures of two witness

A

Void

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13
Q

Which of the following factors must be present for a contract to be valid?

Recorded

Involuntary

Placed in the public record

Mutual agreement

A

Mutual agreement

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14
Q

What is an important legal feature of a contract?

It is not voidable.

It must use precise wording in a document.

It represents a “meeting of the minds.”

It can be created only by an attorney.

A

It represents a “meeting of the minds.”

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15
Q

An oral or written contract in which the parties state the contract’s terms and communicate their intentions in words is known as:

An implied contract

An express contract

Legally void

Voluntary

A

An express contract

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16
Q

An implied contract may be deemed to exist if:

The parties do not disavow an express contract that has expired.

The parties act as if there is a contract.

An offering party does not receive written notice that the offer has been rejected.

The parties promise to perform their part of the agreement if the other party performs.

A

The parties act as if there is a contract.

17
Q

A letter of intent is basically _______________________.

an agreement to agree.

designed for long term leases.

prepared by the seller’s account.

designed for short term rentals.

A

an agreement to agree.

18
Q

Those people who are of legal age and sound mind are considered:

Legally competent parties

Legally enforceable parties

Legally considerate parties

Legally viable parties

A

Legally competent parties

19
Q

What is a breach of contract?

A termination of the contract by the mutual consent of the parties.

Financial damage suffered by a party because another party has nullified a contract provision.

A lawsuit to force a party to discharge the contract.

The failure of a party to perform according to the terms of the contract.

A

The failure of a party to perform according to the terms of the contract.

20
Q

The necessary condition of mutual consent may be found lacking in a contract if:

The two parties did not discuss every possible interpretation of the contract’s provisions.

The offer which was accepted is vague.

One party did not have the legal authority to sign the contract.

The agreement is unwritten

A

The offer which was accepted is vague.

21
Q

Several buyers are competing for the last available home in a desirable new subdivision. One buyer calls the owner-developer directly on the phone and offers $10,000 over and above the listed price. The developer accepts the offer. At this point,

a. the parties have a valid, enforceable sale contract on the home.
b. the parties have completed a verbal, executory contract.
c. the parties may not cancel their contract.
d. the developer could not entertain other offers on the property

A

b. the parties have completed a verbal, executory contract.

22
Q

An owner completes a contract to sell her property. Before closing, the seller runs into financial trouble and assigns the contract to her principal creditor. The buyer cries foul, fearing the property will be lost. Which of the following is true?

a. The buyer can sue the assignee to disallow the illegal assignment.
b. The buyer can take legal action against the assignor.
c. The assignor has completed a legal action.
d. The sale contract is nullified.

A

c. The assignor has completed a legal action.

23
Q

During the executory period of a sale contract, the buyer acquires an equitable title interest in the property. This means that

a. the buyer can potentially force the seller to transfer ownership.
b. both parties own the property equally.
c. if contract contingencies are not met, the buyer takes legal title.
d. the buyer owns equity in the subject property to the extent of the funds deposited in escrow.

A

a. the buyer can potentially force the seller to transfer ownership.

24
Q

The purpose of an escrow account is to

a. entrust deposit monies to an impartial fiduciary.
b. enable the principals to access the funds in escrow without interference from the other party.
c. ensure that the broker receives her commission.
d. prevent the buyer from withdrawing the offer

A

a. entrust deposit monies to an impartial fiduciary

25
Q

A sale contract contains an open-ended financing contingency: if the buyer cannot obtain financing, the deal is off. Six months later, the buyer still cannot secure financing. Which of the following is true?

a. The seller may cancel the contract, since it can be ruled invalid.
b. The buyer can continue indefinitely to seek financing, and the seller’s property must remain off the market.
c. The seller must return the buyer’s deposit.
d. The seller can force a lender to commit to a loan under fair financing laws.

A

a. The seller may cancel the contract, since it can be ruled invalid.

26
Q

In the event of a buyer’s default, a provision for liquidated damages in a sale contract enables a seller to

a. sue the buyer for the anticipated down payment.
b. force the buyer to quitclaim equitable title.
c. sue the buyer for all liquid assets lost as a result of the default.
d. claim the deposit as relief for the buyer’s failure to perform.

A

d. claim the deposit as relief for the buyer’s failure to perform.

27
Q

Which of the following best characterizes a conventional sale contract?

a. Voluntary, unilateral, and executory
b. Involuntary, bilateral, and contingent
c. Voluntary, bilateral, and executory
d. Involuntary, unilateral, and executory

A

c. Voluntary, bilateral, and executory

28
Q

A due-on-sale clause in a sale contract puts parties on notice that

a. the full price of the property is due the seller at closing.
b. any loans surviving closing become immediately payable.
c. all of the seller’s debts must be retired before or upon closing.
d. third-party loans surviving closing may be accelerated by the lender.

A

d. third-party loans surviving closing may be accelerated by the lender.

29
Q

A sale contract may specifically deal with tax withholding responsibility if the seller is a foreigner. What is this responsibility?

a. The buyer must withhold 15% of the purchase price at closing for the seller’s capital gain tax payment.
b. The buyer must withhold 15% of the purchase price at closing for the buyer’s capital gain tax payment.
c. The seller must withhold 15% of the buyer’s funds as a deposit on the buyer’s capital gain tax.
d. The seller must withhold 15% of the sale price to pay the seller’s capital gain tax.

A

a. The buyer must withhold 15% of the purchase price at closing for the seller’s capital gain tax payment.

30
Q

An important legal characteristic of an option-to-buy agreement is that

a. the potential buyer, the optionee, is obligated to buy the property once the option agreement is completed.
b. the optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.
c. the contract can be executed at no cost to the optionee.
d. it is a bilateral agreement

A

b. the optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so

31
Q

A tenant has an option-to-purchase agreement with the landlord that expires on June 30. On July 1, the tenant frantically calls the landlord to exercise the option, offering the apology that she was busy with a death in the family. Which of the following is true?

a. Since options contain grace periods, the landlord must sell.
b. The tenant loses the right to buy, but can claim the money paid for the option from the landlord.
c. The landlord does not have to sell, but must renew the option.
d. The option is expired, and the tenant has no rightful claim to money paid for the option.

A

d. The option is expired, and the tenant has no rightful claim to money paid for the option.

32
Q

A tenant exercises an option to buy a condominium. The landlord agrees, but raises the agreed price by $3,000, claiming financial distress. The landlord does, however, offer the tenant two months of free rent before closing as an offset. Which of the following is true?

a. The tenant can force the sale at the original terms.
b. The landlord has taken a fully legal action which the tenant must abide by.
c. The option is null, and the optionee may reclaim any option money paid.
d. The landlord must offer sufficient free rent to equal the $3,000 price increase

A

a. The tenant can force the sale at the original terms.

33
Q

Which of the following is true regarding the legal nature of option contracts?

a. They are not assignable.
b. They are enforceable, whether written or oral.
c. They give the optionee an equitable interest in the property.
d. They must be recorded to be valid

A

c. They give the optionee an equitable interest in the property.

34
Q

An important distinction between a contract for deed and a contract for sale is

a. a contract for deed requires no action on the part of the seller.
b. a contract for deed requires no action on the part of the buyer.
c. the seller retains legal title in a contract for deed transaction until fully executed.
d. the buyer acquires legal title in a contract for deed transaction.

A

c. the seller retains legal title in a contract for deed transaction until fully executed.

35
Q

While a property is under a contract for deed, the seller, or vendor, mortgages her equity in the property, and has a separate judgment lien placed on the property. Faced with financial loss, the vendor assigns the contract to another party, then leaves town. What can the vendee do in this case?

a. rightfully cancel the agreement and reclaim all deposits.
b. sue the creditor for removal of the judgment lien.
c. disclaim the lien and the mortgage due to homestead rights.
d. comply with the contract and take legal title when its terms are fulfilled

A

d. comply with the contract and take legal title when its terms are fulfilled

36
Q

A potential danger involved in a contract for deed is that

a. the vendor may rightfully sell legal title to another party during the contract period.
b. the vendor’s rights to encumber the property are extinguished.
c. the vendee may not have a right of redemption.
d. the vendee must make an inordinately high down payment, which can be lost.

A

c. the vendee may not have a right of redemption.

real estate study notes (70 decks)

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