The Contract of Sales and Leases

Question 1

In New York State, an individual must be at least __ _____ __ ___ to enter into a contract.

Answer 1

18 years of age.

Minors (less than 18 years old) CANNOT enter into a contract. The contract is voidable if signed by a minor.

Question 2

In New York State, an individual must be ________ ___ ___________ capable to enter into a contract.

Answer 2

mentally and emotionally.

Question 3

Generally, the purchaser signs the contract of sale first because…

Answer 3

the purchaser is the party making the offer.

The purchaser is stating the purchase price he/she wants to offer and the terms.

Question 4

A bi-lateral contract…

Answer 4

includes two parties.

Most contracts in real estate are bi-lateral.

Question 5

A few common examples of bi-lateral contracts include …

Answer 5

listing contracts, sales contracts, buyer representation agreements and independent contractor agreements.

Question 6

A uni-lateral contract is an “open contract” where one party promises to pay another party if the other party performs a specific action.
An open listing contract is an example of a uni-lateral contract.

Answer 6

one party promises to pay another party if the other party performs a specific action.

Question 7

An open listing contract is an example of a…

Answer 7

uni-lateral contract.

Question 8

The down payment is the…

Answer 8

portion of a property’s purchase price that is paid in cash and is not part of the mortgage loan.

Question 9

The down payment must be placed in a…

Answer 9

a separate escrow account.

Question 10

The following people generally hold the deposit/down payment:

Answer 10

• Listing agent (seller’s broker)

- Seller’s attorney

Question 11

Earnest money deposit is a deposit that a…

Answer 11

buyer makes at the time of submitting an offer to demonstrate the true intent of the purchase; also referred to as a binder, good faith deposit, and escrow deposit.

An earnest money deposit is usually binding.

Question 12

Proration is the…

Answer 12

division of certain settlement costs between buyer and seller.

Question 13

Prorated settlement costs can include…

Answer 13

real estate taxes, fuel, a survey, water and sewer charges, rent, and security deposits.
Proration ensures fair apportionment of expenses between buyer and seller.

Question 14

A contract may be discharged or terminated in the case of: Agreement of the parties:

Answer 14

If both parties agree to terminate the contract, a release of contract can be performed.

Question 15

Novation is is the act of either:

Answer 15

1) replacing an obligation to perform with a new obligation; or
2) adding an obligation to perform; or
3) replacing a party to an agreement with a new party

Question 16

A contract may be discharged or terminated when the duties of the contract are performed by both parties, ____ ___________ is achieved.

Answer 16

full performance.

This is the most common and desirable way to discharge a contract

Question 17

If there is a change in the law which makes full performance of the contract illegal, the contract may be discharged due to

Answer 17

impossibility of performance.

In another example, if a property is destroyed by fire, the listing contract between the owner and broker may be discharged due to ‘impossibility of performance’.

Question 18

A contract may be discharged or terminated in the case of: Operation of law: This includes

Answer 18

the statue of limitations.

Question 19

Specific performance: This is an order from the court requiring…

Answer 19

specific performance. This means that the contract is to be completed as the parties originally agreed.

Question 20

Compensatory damages equal the…

Answer 20

amount of money actually lost due to the breach of contract.

Question 21

Liquidated damages are…

Answer 21

damages agreed to be paid in the contract.

Question 22

Reformation is a

Answer 22

doctrine that permits the court to rewrite a contract.

Question 23

The right of first refusal may be added to a sales contract or a lease. It allows the holder to…

Answer 23

purchase (or lease) a property if the seller decides to sell or another purchaser (or lessee) comes along. The holder of the right of first refusal can match the offer from the third party or forfeit their claim to purchase or lease the property.

Question 24

The ‘use provisions’ is a clause in a lease that…

Answer 24

requires a tenant reasonably use the space for its intended use.

For example, a tenant cannot continuously throw loud, late-night parties, which disturb the other tenants in the building.

Question 25

In an assignment, the assignee is responsible for…

Answer 25

paying the rent directly to the landlord. The assignee takes responsibility of the lease.

Question 26

In a sublease, the original tenant is…

Answer 26

still responsible to the landlord for the lease payments under the lease contract.

Question 27

In a sublease arrangement, the sub-lessee pays the rent to…

Answer 27

the tenant (lessee) and the tenant pays the landlord.

Question 28

Eviction is a legal proceeding by a landlord to…

Answer 28

recover possession of real property.

Question 29

Actual eviction occurs when…

Answer 29

the landlord removes the tenant from the property without aid or control of the court system.
Actual eviction is wrongful use of self-help.

Question 30

Constructive Eviction occurs when…

Answer 30

the tenant is prevented from the quiet enjoyment of the property.

In other words, the landlord deliberately renders the property unfit or unsuitable to live in.
An example may be refusing to repair a broken toilet or bathtub.

If a rental has become unlivable, tenants can use the legal concept of constructive eviction to break their lease without penalties