Unit 1

Question 1

Which of these promulgated forms does NOT include “time is of the essence”?:

The six promulgated contract forms

Addendum for Back-Up Contract

Short Sale Addendum

Loan Assumption Addendum

Answer 1

Loan Assumption Addendum

Response Feedback:
The answer is Loan Assumption Addendum. The six promulgated contract forms and four addenda include “time is of the essence”: Addendum for Sale of Other Property by Buyer, Addendum for Back-Up Contract, Third Party Financing Addendum, and Short Sale Addendum. Learning Objective 1.4

Question 2

A person approaches an owner and says, “I’d like to buy your house.” The owner says, “Sure” and they agree on a price. What type of contract is this?:

Implied

Unenforceable

Void

It is not a contract

Answer 2

Unenforceable

Response Feedback:
The answer is unenforceable. An oral contract may be valid if all parties continue to agree but it is not able to be enforced. The statute of frauds requires that real estate contracts be in writing. Learning Objective 1.2

Question 3

A buyer and seller enter a contract for the sale of a 3-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller agrees. How should the parties proceed?:

The parties must use an amendment form.

The parties must document this agreement in the Special Provisions paragraph of the contract.

They have to proceed under the terms of the current contract; because the parties are already under contract, no further negotiations are allowed.

The broker must contact his attorney to get advice.

Answer 3

The parties must use an amendment form.

Response Feedback:
The answer is the parties must use an amendment form. If a change is made after all parties have signed off, a separate amendment must be prepared requiring the signature of all parties. Learning Objective 1.5

Question 4

The essential elements of a valid real estate contract include:

all of these.

signatures of the parties.

competent parties.

consideration.

Answer 4

all of these.

Response Feedback:
The answer is all of these. The Statute of Frauds requires that, to be enforceable, all agreements affecting title to or interest in real estate in Texas be in writing and signed by the parties. Learning Objective 1.1

Question 5

A seller accepted money from a buyer for his unrestricted right to cancel the purchase transaction (option to terminate) within ten days of the executed date of the sales contract. This agreement is a(n):

bilateral contract.

unilateral contract.

covenant clause in the sales contract.

executory agreement.

Answer 5

unilateral contract.

Response Feedback:
The answer is unilateral contract. This is a one-sided agreement with the seller’s promise to sell enticing the buyer to buy his property. The buyer is not legally obligated to act but the seller is obligated to keep his promise. Learning Objective 1.3

Question 6

One party cancelling or terminating a contract as though it had never been made is:

revocation.

cancellation.

rescission.

statutory reenactment.

Answer 6

rescission

Response Feedback:
The answer is rescission. Rescission returns the parties to their original positions before the contract, so any monies exchanged must be returned. Rescission is normally a contractual remedy for a breach. Learning Objective 1.7

Question 7

The statute of limitations for a written contract for the sale of real estate in Texas is:

four years.

six years.

not defined.

the same as it is for an oral contract for a lease of a year or less.

Answer 7

four years.

Response Feedback:
The answer is four years. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years. Learning Objective 1.6

Question 8

In Texas, the statute of limitations for an oral contract for a lease of less than one year is:

two years.

four years.

the same as the length of the lease.

not defined.

Answer 8

two years.

Response Feedback:
The answer is two years. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years. Learning Objective 1.6

Question 9

A buyer and a seller enter into a contract using the One to Four Family Residential Contract, which is one of TREC’s six promulgated contracts. The effective date of the contract is February 4, and the seller has 4 days to fulfill a duty under the contract. By when must the seller complete the duty?:

February 8 at midnight

February 7 at midnight

Sometime before February 10

February 8 at noon

Answer 9

February 8 at midnight

Response Feedback:
The answer is February 8 at midnight. According to the One to Four Family Residential Contract, time is of the essence, so the seller is held to exact performance (i.e., February 10 is not acceptable). The effective date of the contract is not counted in the time frame, so the seller has February 5, 6, 7, and 8 until midnight to fulfill the duty. Learning Objective 1.4

Question 10

If parties to a real estate contract in Texas are held to very strict deadlines for performance, the contract likely includes the phrase:

“reasonable time.”

“time is of the essence.”

“as soon as possible.”

“with good faith.”

Answer 10

“time is of the essence.”

Response Feedback:
The answer is “time is of the essence.” Courts must hold the parties to exact performance within the time specified when “time is of the essence.” Learning Objective 1.4

Question 11

A contract is classified as bilateral if:

both of the parties are minors.

it has yet to be fully performed.

only one party to the agreement is bound to act.

all parties to the contract exchange binding promises.

Answer 11

all parties to the contract exchange binding promises.

Response Feedback:
The answer is all parties to the contract exchange binding promises. A contract is said to be bilateral if both parties to the agreement make promises to each other to do something (promise for a promise). Learning Objective 1.3

Question 12

To make a change to a contract:

the parties must state the change in the Special Provisions paragraph.

the parties may agree upon the change orally.

the parties must request the change in writing to their broker.

an amendment must be used.

Answer 12

an amendment must be used.

Response Feedback:
The answer is an amendment must be used. In order to make any changes to the contract, a separate written amendment must be completed and signed by all the parties. Learning Objective 1.5

Question 13

Which of the following is necessary for a valid legal contract?:

Lawful objective

Government acceptance

Statutory approval

A Texas Real Estate Commission form

Answer 13

Lawful objective

Response Feedback:
The answer is lawful objective. A contract for an illegal purpose or an act against public policies is not a valid contract. Learning Objective 1.1

Question 14

Contracts may be discharged or terminated whenever the parties agree, along with a written acceptance, that the work performed is close enough to completion and that the contract is discharged even if some minor elements remain unperformed. This is called:

substantial performance.

mutual agreement.

partial performance.

operation of law.

Answer 14

partial performance.

Response Feedback:
The answer is partial performance. Discharge or termination requires written acceptance by the party for whom the acts have not been done, or to whom money is owed. Learning Objective 1.7

Question 15

When a contract lacks one of the essential elements of a legal contract it is:

Valid.

Deficient.

Void.

Meritless.

Answer 15

Void

Response Feedback:
The answer is void. A contract that is lacking in one or more of the essential elements is void and has no legal force or effect. A contract that is void was never a legal contract. Learning Objective 1.2

Question 16

A contract can be discharged or terminated:

at the option of the buyer’s broker.

by impossibility of performance.

because of personality conflicts.

by transfer by proxy.

Answer 16

by impossibility of performance.

Response Feedback:
The answer is by impossibility of performance. Impossibility of performance means that an act required by the contract cannot be legally accomplished. For example, suppose a contract stipulates that a buyer must be able to park his RV in the driveway of the property. After research, it is determined that deed restrictions prohibit that action. Learning Objective 1.7

Question 17

A contract is said to be bilateral if:

one of the parties is a minor.

the contract has yet to be fully performed.

only one party to the agreement is bound to act.

all parties to the contract exchange binding promises.

Answer 17

all parties to the contract exchange binding promises.

Response Feedback:
The answer is all parties to the contract exchange binding promises. Bilateral mean that each of the parties agrees to give something (i.e., buyer and seller, seller and listing broker, landlord and tenant). Learning Objective 1.3

Question 18

A contract with a person under duress is:

void.

enforceable.

voidable.

valid.

Answer 18

voidable.

Response Feedback:
The answer is voidable. If a contract was made under duress, with misrepresentation, under the influence, or with intent to defraud, it is voidable. Learning Objective 1.2

Question 19

An addendum is:

a change in the original contract.

a modification to the original contract.

a change in the offer.

additional information given in the offer.

Answer 19

additional information given in the offer.

Response Feedback:
The answer is additional information given in the offer. An addendum is any additional material that is part of the original agreement. If an addendum is needed, it is ideal to have it added to the original contract form during the offer stage. Learning Objective 1.5

Question 20

A contract to perform an unlawful act is considered which of the following?:

Unilateral

Voidable

Void

Enforceable

Answer 20

Void

Response Feedback:
The answer is void. A contract must be for a legal act. No one may enter into a legal contract for an illegal purpose. Learning Objective 1.2

Question 21

An amendment:

is a change to the original agreement.

is a separate agreement.

is never attached to the original agreement.

needs signatures of buyers, brokers, and sellers.

Answer 21

is a change to the original agreement.

Response Feedback:
The answer is is a change to the original agreement. The amendment becomes part of the original agreement with changes made by the parties with buyer and seller signatures and is always attached to the original contract form. Learning Objective 1.5

Question 22

One party cancelling or terminating a contract without a return to the original position is:

rescission.

cancellation.

statutory reenactment.

revocation.

Answer 22

cancellation

Response Feedback:
The answer is cancellation. The parties are not returned to their original positions so any monies exchanged do not have to be returned. Learning Objective 1.7

Question 22

“Time is of the essence” in real estate contracts means:

that the time to closing should kept to three weeks or less.

that parties must pay a daily fine for delays in the performance of their duties under the contract.

that parties are held to exact performance of their duties within the time specified in the agreement.

none of these.

Answer 22

that parties are held to exact performance of their duties within the time specified in the agreement.

Response Feedback:
The answer is that parties are held to exact performance of their duties within the time specified in the agreement. Parties are held to exact performance within the time specified when the agreement has incorporated the words “time is of the essence” or when an Option to Purchase or an Option to Terminate is the contract being interpreted. Learning Objective 1.4

Question 23

Which of the following would NOT be considered a competent party?:

A 16-year-old who was emancipated by a court of competent jurisdiction and declared an adult with contractual capacity

A 20-year-old who has not completed high school

A properly appointed attorney-in-fact

A 30-year-old attorney under the influence of marijuana at the time she entered into an agreement

Answer 23

A 30-year-old attorney under the influence of marijuana at the time she entered into an agreement

Response Feedback:
The answer is a 30-year-old attorney under the influence of marijuana at the time she entered into an agreement. A competent party is a person who is at least 18 years old, sane, and sober. Learning Objective 1.1

Question 24

When all of the parties to a contract agree to terminate it is said to be terminated by

mutual agreement.

novation.

codicil.

severalty.

Answer 24

mutual agreement.

Response Feedback:
The answer is mutual agreement. All of the parties to an agreement may agree to terminate a contract. If two parties agree to make an agreement, the two parties can agree to terminate it. Learning Objective 1.7

Question 25

A contract that complies with all the basic requirements may still be either void or voidable. To be valid, the contract must have:

one essential element.

title approval.

underwriter approval.

mutual agreement.

Answer 25

mutual agreement.

Response Feedback:
The answer is mutual agreement. A contract must be entered into by consent as a free and voluntary act of each party. Learning Objective 1.1

Question 26

Which of the following is required for a valid contract?:

Standard real estate commission agreement

Consideration

Title policy

Survey

Answer 26

Consideration

Response Feedback:
The answer is consideration. Consideration is something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act. Anything that has been bargained for and exchanged is legally sufficient to satisfy the requirement for consideration. Learning Objective 1.1

Question 27

A contract that exchanges a promise for a promise is said to be:

unilateral.

bilateral.

omnilateral.

relateral.

Answer 27

bilateral

Response Feedback:
The answer is bilateral. Whenever all parties to the contract make promises to give something then the contract is said to be bilateral. Learning Objective 1.3

Question 28

According to the Texas legislature, a contract involving the sale of a residence that will take place more than 180 days after the execution of the contract is:

an executory contract.

a bilateral contract.

a unilateral contract.

void.

Answer 28

an executory contract.

Response Feedback:
The answer is an executory contract. Executory contract has a number of meanings: 1) an enforceable contract that is in the process of being fulfilled; 2) in Texas, a contract-for-deed, lease-purchase, or lease-option; or 3) a contract involving the sale of a residence that will take place more than 180 days after the execution of the contract. Learning Objective 1.3

Question 29

TREC promulgates the Loan Assumption Addendum. In a transaction where a buyer is assuming a seller’s loan:

TREC’s Loan Assumption Addendum is required.

the buyer and seller should hire an attorney to draft an addendum to address this.

TREC’s Loan Assumption Addendum is required if the loan being assumed is greater than $50,000.

TREC’s amendment is required.

Answer 29

TREC’s Loan Assumption Addendum is required if the loan being assumed is greater than $50,000.

Response Feedback:
The answer is TREC’s Loan Assumption Addendum is required. If TREC provides a promulgated addendum that addresses a situation, the addendum must be used. Learning Objective 1.5

Question 30

A buyer and a seller enter into a contract using the Farm and Ranch Contract, which is one of TREC’s six promulgated contracts. The effective date of the contract is June 20, and the buyer has 8 days to fulfill a duty under the contract. By when must the buyer complete the duty?:

June 27 at midnight

June 30 at the latest

June 28 at noon

June 28 at midnight

Answer 30

June 28 at midnight

Response Feedback:
The answer is June 28 at midnight. According to the Farm and Ranch Contract, time is of the essence, so the buyer is held to exact performance (i.e., end of June is not acceptable). The effective date of the contract is not counted in the time frame, so the buyer has June 21, 22, 23, 24, 25, 26, 27, and 28 until midnight to fulfill the duty. Learning Objective 1.4

Question 31

Which of these addenda includes “time is of the essence”?:

Addendum for Sale of Other Property by Buyer

Addendum for Back-Up Contract

All of these

Short Sale Addendum

Answer 31

All of these

Response Feedback:
The answer is all of these. The six promulgated contract forms and four addenda include time is of the essence: Addendum for Sale of Other Property by Buyer, Addendum for Back-Up Contract, Third Party Financing Addendum, and Short Sale Addendum. Learning Objective 1.4

Question 32

After a real estate sales contract is signed but before title actually passes, the status of the contract is:

voidable.

executory.

unilateral.

implied.

Answer 32

executory.

Response Feedback:
The answer is executory. A sales contract is bilateral (buyer and seller each have promised something) but remains executory until closing when the title is conveyed to the buyer and the seller receives funds from the sale. Learning Objective 1.3

Question 33

A contract may be discharged for any of the following reasons EXCEPT:

an assignment of rights to another party.

a novation substituting a new party to the contract.

a breach of contract with legal cause by either party.

a unilateral decision by either party to terminate the contract.

Answer 33

a unilateral decision by either party to terminate the contract.

Response Feedback:
The answer is a unilateral decision by either party to terminate the contract. A unilateral decision to terminate by one party without the right to terminate would cause the terminating party to be in breach. Learning Objective 1.7

Question 34

Once a contract has been agreed upon and signed by all parties:

changes must be addressed through the use of an amendment.

no changes will be allowed.

the broker will write up an exhibit to the contract to address changes.

any changes are to be addressed in the Special Provisions paragraph.

Answer 34

changes must be addressed through the use of an amendment.

Response Feedback:
The answer is changes must be addressed through the use of an amendment. Once the original contract has been ratified (signed by all parties), any changes need to be addressed in an amendment. Learning Objective 1.5

Question 35

Which of the following is TRUE for the statute of limitations for contracts for the sale of real estate and oral contracts for leases of less than one year?:

The statute of limitations is four years for the sale and two years for the lease.

The statute of limitations is four years for both the sale and the lease.

The statute of limitations is two years for both the sale and the lease.

The statute of limitations is two years for the sale and four years for the lease.

Answer 35

The statute of limitations is four years for the sale and two years for the lease.

Response Feedback:
The answer is the statute of limitations is four years for the sale and two years for the lease. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years. Learning Objective 1.6

Question 36

A contract may be discharged under substantial performance when:

one party does not complete all the details exactly as the contract requires but has to a large extent performed on the contract, which may be enough to force payment.

it’s impossible for one party or the other to complete a given task.

one party has considerably more responsibility under the contract than the other.

all but one requirement has been fulfilled by a party that is unsure about proceeding with the transaction and wants a concession.

Answer 36

one party does not complete all the details exactly as the contract requires but has to a large extent performed on the contract, which may be enough to force payment.

Response Feedback:
The answer is one party does not complete all the details exactly as the contract requires but has to a large extent performed on the contract, which may be enough to force payment. An example of this is a newly constructed addition to a home that is finished except for polishing the brass door knobs, in which case the contractor may be entitled to the final payment and the contract is discharged. Learning Objective 1.7

Question 37

The statute of limitations is four years for which of the following?:

A contract for the sale of real estate

Oral contracts for a lease of less than one year

None of these

All contracts for the sale or lease of real property in Texas

Answer 37

A contract for the sale of real estate

Response Feedback:
The answer is a contract for the sale of real estate. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years. Learning Objective 1.6

Question 38

Under the statute of frauds, all contracts for the sale of real estate must be:

originated by a real estate broker.

on preprinted forms.

in writing to be enforceable.

accompanied by an earnest money deposit.

Answer 38

in writing to be enforceable.

Response Feedback:
The answer is in writing to be enforceable. A contract for sale must include the elements of offer and acceptance, consideration, legally competent parties, consent and legal purpose, and be in writing to be enforceable. If any element is missing, the contract is void. Learning Objective 1.1

Question 39

A legally enforceable agreement under which two parties promise to do something for each other is classified as a(n):

escrow agreement.

legal pledge.

bilateral contract.

option agreement.

Answer 39

bilateral contract.

Response Feedback:
The answer is bilateral contract. A contract is bilateral if both parties to the agreement promise to do something in exchange for the other’s promise to do something. Learning Objective 1.3

Question 40

A seller and buyer have entered into a sales contract, and the seller fails to deliver title to the buyer. This is an example of:

rescission.

cancellation.

Correct
breach of contract.

impossibility of performance.

Answer 40

breach of contract.

Response Feedback:
The answer is breach of contract. A breach of contract is a violation of any of the terms or conditions of a contract without legal reason. Learning Objective 1.7

Question 41

In Texas, the statute of limitations is two years for:

oral contracts for a lease of less than one year.

a contract for an 18-month lease.

a contract for the sale of real estate.

all contracts for the sale or lease of real property in Texas.

Answer 41

oral contracts for a lease of less than one year.

Response Feedback:
The answer is oral contracts for a lease of less than one year. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years. Learning Objective 1.6

Question 42

When a contract appears to be valid on the surface but neither party can sue the other to force performance it is:

admissible.

tacking.

defenseless.

unenforceable.

Answer 42

unenforceable

Response Feedback:
The answer is unenforceable. An unenforceable contract is an agreement that had all six elements at the time it became an executory contract but, due to a change in conditions, no longer meets the requirements of law and no longer can be upheld by a court. Learning Objective 1.2

Question 42

A contract becomes fully executed when:

the parties have fulfilled the promises made in the agreement.

the buyer moves into the house.

the seller accepts the buyer’s offer and signs and dates the contract.

the date for closing has been established.

Answer 42

the parties have fulfilled the promises made in the agreement.

Response Feedback:
The answer is the parties have fulfilled the promises made in the agreement. When all acts have been performed, the seller has delivered the general warranty deed, and the buyer has accepted it, the contract will become fully executed. Learning Objective 1.3

Question 43

When is the effective date entered on the contract form?:

When the first party signs the form

When the last party signs the form and the other party has been notified of the acceptance

At the closing

When the buyer first makes an offer to the seller

Answer 43

When the last party signs the form and the other party has been notified of the acceptance

Response Feedback:
The answer is when the last party signs the form and the other party has been notified of the acceptance. The effective date is filled in above the signature lines by the broker after the last party, usually the seller, has signed, and the other party, usually the buyer, has been notified of the acceptance. Learning Objective 1.4

Question 44

Once a sales contract is completed with all parties fulfilling their promises, the ownership changing hands, and the seller receiving the sales price amount, the sales contract is a(n)

void contract.

executed contract.

executory contract.

valid contract.

Answer 44

executed contract.

Response Feedback:
The answer is executed contract. At closing, after the seller has conveyed the property to the buyer and the seller has received the sales price amount, the contract is considered an executed contract. Learning Objective 1.3

Question 45

Which of the following is TRUE regarding amendments and addenda?

Amendments and addenda are required in every real estate transaction.

An amendment is completed after a contract has been executed, but addenda are completed at the same time as the sales contract.

An addendum is completed after a contract has been executed, but an amendment is completed at the same time as the sales contract.

TREC amendments and addenda are optional-use forms.

Answer 45

An amendment is completed after a contract has been executed, but addenda are completed at the same time as the sales contract.

Response Feedback:
The answer is an amendment is completed after a contract has been executed, but addenda are completed at the same time as the sales contract. An amendment is a change or modification to the existing content of a contract, and an addendum contains additional information that is part of the original contract/agreement. Learning Objective 1.5

Question 46

The real estate agent representing the seller should encourage the seller to:

require as much earnest money as can be negotiated with the buyer.

use only option contracts.

accept only cash as earnest money because that is necessary for a binding contract.

accept whatever earnest money is offered.

Answer 46

require as much earnest money as can be negotiated with the buyer.

Response Feedback:
The answer is require as much earnest money as can be negotiated with the buyer. In order to fulfill one of the agent’s fiduciary duties to the seller, the agent should encourage as much earnest money as possible because this not only indicates serious interest by the buyer but also provides funds to reimburse the seller for expenses and inconvenience if the buyer does not carry through with the contract. Learning Objective 1.1

Question 46

Which of these addenda does NOT include “time is of the essence”?:

Addendum for Sale of Other Property by Buyer

Addendum for Back-Up Contract

Third Party Financing Addendum

Addendum for Coastal Area Property

Answer 46

Addendum for Coastal Area Property

Response Feedback:
The answer is Addendum for Coastal Area Property. The six promulgated contract forms and four addenda include time is of the essence: Addendum for Sale of Other Property by Buyer, Addendum for Back-Up Contract, Third Party Financing Addendum, and Short Sale Addendum. Learning Objective 1.4

Question 47

The voiding of a contract by a minor is:

only achieved by challenging the contract through a juvenile court.

an example of terminating a contract by the Law of Dower.

an example of terminating a contract by operation of law.

not necessary because the contract never truly existed.

Answer 47

an example of terminating a contract by operation of law.

Response Feedback:
The answer is an example of terminating a contract by operation of law. A contract entered into with a minor is voidable at the option of the minor. Learning Objective 1.7

Question 48

__________ means doing what the contract requires, and ________ means not to do a specific thing.:

Performance, forbearance

Forbearance, performance

Breach, performance

Consideration, breach

Answer 48

Performance, forbearance

Response Feedback:
The answer is performance, forbearance. Performance is doing what a contract requires, and forbearance means not to do something. For example, you might choose not to sue someone for breach of contract (forbear) even though you have the legal right to do so. Learning Objective 1.1

Question 49

If I, as agent for the buyer, tell you, as seller, that my client is extremely wealthy and can pay cash for the property if she wants, when in fact she is broke and cannot begin to qualify for a purchase loan, the contract is:

voidable by you because it was based on fraud.

valid and must be carried out as intended.

voidable by the buyer because the buyer could not qualify for the loan.

void because the promise to buy was insufficient consideration.

Answer 49

voidable by you because it was based on fraud.

Response Feedback:
The answer is voidable by you because it was based on fraud. The contract is voidable at the option of the seller because it was based on a fraudulent representation. Learning Objective 1.2

Question 50

If a loan shark promises you $500 if you will rough up one of his nonpaying customers to encourage prompt repayment, what sort of contract is this?:

Valid

Void

Voidable

Enforceable

Answer 50

Void

Response Feedback:
The answer is void. It has an illegal object and therefore is deemed never to have been a contract. Learning Objective 1.2

Question 51

The seller fails to abide by the rule requiring the seller to provide the buyer the Condo Resale Certificate before the contract is signed, and the seller later receives a better offer. The seller says the contract is voidable due to the failure to provide the certificate, and the seller is therefore free to accept the better offer. The buyer does not want to cancel the contract. Which of these statements is TRUE in this situation?:

The seller must abide by the contract if the buyer so elects.

The seller can void the contract due to the failure to provide the certificate.

The seller must void the contract.

The buyer must void the contract.

Answer 51

The seller must abide by the contract if the buyer so elects.

Response Feedback:
The answer is the seller must abide by the contract if the buyer so elects. Only the buyer has the right to cancel this voidable contract under the law. The seller created the problem and cannot profit by his own bad actions. Learning Objective 1.2

Question 52

Your 17-year-old son signs the notes and contract to purchase a condo so he can move out of the house. He provides the earnest money he has been saving from his part-time job and says his uncle will provide the financing. You inform him the contract is void and he won’t be able to go through with the deal. You are:

wrong. The contract is voidable at the election of the minor, but it is not void.

correct. The contract is void.

wrong. It is voidable at the option of the seller because the buyer is a minor.

required to cosign the financing agreement with your son’s uncle.

Answer 52

wrong. The contract is voidable at the election of the minor, but it is not void.

Response Feedback:
The answer is wrong. The contract is voidable at the election of the minor, but it is not void. An otherwise valid contract signed by a minor is not void, but it can be voided at the election of the minor, but not the other party so long as the other party is not a minor. Learning Objective 1.2

Question 53

A buyer’s agent discovers after the contract has been signed that the seller’s representation that the well delivers 26 GPM (gallons per minute) is false; the seller knows well that the well has never produced more than 2 GPM. The contract is:

void.

voidable.

unenforceable.

executory.

Answer 53

voidable.

Response Feedback:
The answer is voidable. It was procured by misrepresentation, and the buyer has the right to terminate the contract due to what amounts to fraud. It is not “void” because it has the elements of a contract, but the fraud makes it voidable. It is not unenforceable because the buyer can enforce the sale if she so desires. While it is executory (not having been performed by the parties), executory is obviously not relevant to the main issue. Learning Objective 1.2

Question 54

“Lost. Our priceless pet, 3-year old Bull Mastiff, 175 lbs., answers to ‘Chloe.’” $125 reward, no questions asked.” What kind of a contract is this?:

Unilateral

Bilateral

Listing

Option

Answer 54

Unilateral

Response Feedback:
The answer is unilateral. The owner is agreeing to pay $125 if the dog is returned. No one is obligated to return the dog, but if they do, the owner is obligated to pay the reward. Learning Objective 1.3

Question 54

A(n) ____ contract is a contract that is deemed never to have existed, whereas a(n) ___________ contract may be a valid contract, but there is no legal way to see that its terms are performed.:

void, unenforceable

void, voidable

executory, void

unenforceable, void

Answer 54

void, unenforceable

Response Feedback:
The answer is void, unenforceable. A void contract is deemed never to have been in existence, while an unenforceable contract can be a valid contract but for some legal reason its terms cannot be enforced. Learning Objective 1.2

Question 55

He promises to marry her. She promises to marry him. This is an example of:

a bilateral contract.

a unilateral contract.

an option contract.

a buyer representation agreement.

Answer 55

a bilateral contract.

Response Feedback:
The answer is a bilateral contract. Because a promise in exchange for a promise is a valid contract, this is a bilateral contract. Learning Objective 1.3

Question 56

The office manager at your brokerage tells the sales associates that the first agent who closes a $500,000 or higher transaction in June will be paid a bonus of $3,500 over and above whatever the agent’s usual commission is. What kind of contract is this?:

Bilateral

Void

Unilateral

Illegal

Answer 56

Unilateral

Response Feedback:
The answer is unilateral. The manager is bound by the terms to perform (pay $3,500) if any agent closes the $500,000 or higher deal before the end of June. However, the agents are not obligated to close such a deal. Hence, the unilateral (one side only) nature of the contract. Learning Objective 1.3

Question 57

Which of these describes an open listing agreement in which Broker A is entitled to a commission if she sells the property, but the seller or another broker could sell it and pay no commission to Broker A?:

Unilateral contract

Bilateral contract

Purchase agreement

Best type of listing for a broker

Answer 57

Unilateral contract

Response Feedback:
The answer is unilateral contract. This unilateral contract obligates the seller to pay a commission if the agent sells the property, but the agent is not obligated to try to sell it. Open listings are generally very disadvantageous for agents. Learning Objective 1.3

Question 58

Is a provision in the contract stating that a certain task must be completed within a “reasonable time” a good idea?:

No, because the term is open to so much interpretation.

Yes, because it contributes to the need to retain lawyers, which adds more dollars to the local economy.

Yes, because the courts do not have enough to do, and a few more contract interpretation cases will help fill the void.

It is not necessary because all contracts have specific times/dates within which certain events must occur or certain tasks must be performed.

Answer 58

No, because the term is open to so much interpretation.

Response Feedback:
The answer is no, because the term is open to so much interpretation. The reasonableness of the time is subject to many interpretations, and this could result in the failure of the contract, litigation, and hard feelings among all concerned, not to mention the possibility of a complaint by your client to TREC. Learning Objective 1.4

Question 59

The contract is signed by buyer and seller, and the earnest money check is delivered to you (as escrow agent) on Friday afternoon. You decide to take Monday off. You come in Tuesday and review the contract, noting that it has been signed and you have had the earnest money since Friday. Is this a concern?:

Yes, you have had the money for at least three days and have not deposited it. Suspension or revocation is a concern.

No, as long as you can get the buyer and the seller to sign an amendment to the contract saying the money can be deposited up to a week after the contract is executed.

Yes, especially if another offer came in on Sunday.

No, because not only does the day of the effective date of the contract not count, the second business day is Tuesday.

Answer 59

No, because not only does the day of the effective date of the contract not count, the second business day is Tuesday.

Response Feedback:
The answer is no, because not only does the day of the effective date of the contract not count, the second business day is Tuesday. Monday is the first day, and Tuesday is the second business day so you are okay so long as you get the check deposited on Tuesday. Learning Objective 1.4

Question 60

About a week after the effective date of the contract, the buyer and the seller agree to change the closing to a week earlier than the contract provides. You tell your client to mark the change on the original contract, initial it, and it is all set. Is that good advice?:

No, aside from the fact you are required to use the promulgated addendum form, an amendment is not binding unless all parties have signed it.

Yes, this takes care of it.

Yes, so long as the other party also initials it.

No, a lawyer should be retained to write a formal amendment to the contract.

Answer 60

No, aside from the fact you are required to use the promulgated addendum form, an amendment is not binding unless all parties have signed it.

Response Feedback:
The answer is no, aside from the fact you are required to use the promulgated addendum form, an amendment is not binding unless all parties have signed it. There may be contractual and disciplinary issues ahead. One could argue that if both parties initial or sign the change, it would be binding, and that is probably true. However, that doesn’t solve the problem of not having used a promulgated form when one is available. Learning Objective 1.5

Question 60

The offer was signed by the buyer on February 13 and accepted by the seller on February 14, with the acceptance being communicated to the buyer on that same day. When should the agents start counting the 10 days after the effective date of the contract within which the seller must provide a current domestic well yield report?:

February 16

February 14

February 15

February 17

Answer 60

February 15

The answer is February 15. When the word after is used, the effective date of the contract is not counted for purposes of calculating days. Learning Objective 1.4

Question 61

Your client has asked you to add time is of the essence to a couple of the provisions of the purchase contract. What is your most appropriate response?:

“I’m not sure that is a good idea, but you and the buyer should consult with your attorneys about this.”

“Sure. Where do you want this added?”

“I can’t add this, but you can. Here is a pen.”

“Absolutely not. If that is what you want, the deal is off as far as I am concerned.”

Answer 61

“I’m not sure that is a good idea, but you and the buyer should consult with your attorneys about this.”

Response Feedback:
The answer is “I’m not sure that is a good idea, but you and the buyer should consult with your attorneys about this.” A real estate broker or salesperson should never add the words time is of the essence to a contract or advise a customer or client to do so. Learning Objective 1.4

Question 62

The second paragraph of the TREC-promulgated Amendment form deals with what type of amendments?:

Additional itemized repairs

Sales price

Division of lender-required repair costs

Other modifications

Answer 62

Additional itemized repairs

Response Feedback:
The answer is additional itemized repairs. The other answers are covered by other paragraphs in the form. Learning Objective 1.5

Question 63

The contract, which has an added “time is of the essence” clause, requires delivery to the buyer (your client) of a detailed inventory of cattle and farm equipment no later than noon, February 14, 2019. The seller rushes into your office on the 14th at 1:30 pm, with a complete list. Which of the following is TRUE in this situation?:

The buyer can claim breach of the contract and receive back the earnest money previously paid.

Showing up with the list a mere hour and half late is still a reasonable time, and the contract continues in full force.

You have breached your fiduciary duty by not reminding the seller of the approaching deadline at least the day before.

The buyer has no choice but to accept the list and move forward with the transaction.

Answer 63

The buyer can claim breach of the contract and receive back the earnest money previously paid.

Response Feedback:
The answer is the buyer can claim breach of the contract and receive back the earnest money previously paid. While being late with the list by only an hour and a half probably causes no real problems for the buyer, and the delivery is reasonable by any practical measure, the time of the essence phrase removes the flexibility in making that call. Note that the buyer is not required to terminate the deal, but does have the right to do so. Learning Objective 1.5

Question 64

A few days after the contract to purchase the condo was signed by both parties, the seller realized he had forgotten to exclude the built-in wine cabinet located in the kitchen. After some negotiation, the parties agree to exclude the cabinet and agree on a slight reduction in the price of the property as a result. These items will be addressed in:

an amendment.

an addendum.

a price reduction option.

an oral agreement and finalized at closing.

Answer 64

an amendment.

Response Feedback:
The answer is an amendment. An addendum is used to add or modify terms at the time a contract is being prepared and signed. An amendment changes a contract term or terms after the original contract agreement has already been signed. Learning Objective 1.5

Question 65

After the contract was signed but before closing, it was determined that the name of the buyer should be changed to “Eric Decker and Jesse James Decker, as JTWROS.” How should this change be addressed?:

In an amendment

In an addendum

In a brand-new contract

By the buyers after closing

Answer 65

In an amendment

Response Feedback:
The answer is in an amendment. An amendment is a change or modification to the existing content of a contract. An addendum contains additional information that is part of the original contract or agreement. Learning Objective 1.5

Question 66

The two-year statute of limitations under the Texas Deceptive Trade Practices Act, begins to run:

from the date when the complaining party discovers or should have discovered the deceptive act.

from the effective date of the original contract.

from the date title to the property passes.

from the date the balance of the agent’s commission is paid.

Answer 66

from the date when the complaining party discovers or should have discovered the deceptive act.

Response Feedback:
The answer is from the date when the complaining party discovers or should have discovered the deceptive act. While it is possible that the other answer choices might also be the date when the discovery should have occurred, those are fact-based assumptions, and those facts are not given in the question. Learning Objective 1.6

Question 67

What is the statute of limitations for an oral contract for the six-month lease of a property?:

Six months

One year

Two years

No statute of limitations because a contract for the six-month lease of a property must be in writing

Answer 67

Two years

Response Feedback:
The answer is two years. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years. Learning Objective 1.6

Question 68

With a verbal agreement, you lease your garage to your neighbor from January 1, 2022, to September 1, 2022, to store his car. He promises to pay the rent in a lump sum no later than January 3, 2022. He doesn’t pay. How long do you have to file suit to collect?:

Until January 2, 2024

Until January 2, 2023

Until September 1, 2023

Until September 1, 2024

Answer 68

Until January 2, 2024

Response Feedback:
The answer is January 2, 2024. The statute of limitations on an oral contract is two years from the date of breach. Learning Objective 1.6

Question 69

A claim for fraud accrues:

on the date the defendant makes the allegedly false representations.

no more than four years after the defendant makes the allegedly false representations.

no more than two years after the defendant makes the allegedly false representations.

when the defendant cashes the check obtained by the false representations.

Answer 69

on the date the defendant makes the allegedly false representations.

Response Feedback:
The answer is on the date the defendant makes the allegedly false representations. In the Seureau vs. ExxonMobil case you read about, the court states that the claim accrues when the false representation is made. Learning Objective 1.6

Question 69

Which of the following is NOT a means by which a contract might be lawfully terminated without consequences?:

Hatred of the buyer by the seller

By operation of law

Rescission

Impossibility

Answer 69

Hatred of the buyer by the seller

Response Feedback:
The answer is hatred of the buyer by the seller. All the other choices are means that would result in cancellation of the contract without legal consequences to either party. Learning Objective 1.7

Question 70

Your client has a valid and enforceable contract to purchase a prize Arabian stallion. Before the deal closes, the horse breaks its leg and has to be euthanized. The contract is terminated as a result of:

impossibility of performance.

operation of law.

insubstantial performance.

breach by the seller.

Answer 70

impossibility of performance.

Response Feedback:
The answer is impossibility of performance. Clearly, the subject of the contract has been destroyed, and absent provisions in the contract dealing with that eventuality (not provided in the facts), it is impossible for the seller to deliver the animal you agreed to purchase. Learning Objective 1.7

Question 71

A breach of contract is defined as:

a violation of any terms or conditions of the contract without legal reason or justification.

fulfilling all terms of a contract.

collecting a sales commission when you don’t have a real estate license.

cashing the earnest money check before the buyer signs the contract.

Answer 71

a violation of any terms or conditions of the contract without legal reason or justification.

Response Feedback:
The answer is a violation of the terms or conditions of the contract without legal reason or justification. A seller might choose to not perform some condition of the contract, such as timely delivery of a well test, because the buyer’s check to pay for the test was returned for insufficient funds. This would be a failure to perform in a timely manner, but would certainly be with legal justification. The commission and earnest money check answers might be unethical or illegal, but they would not necessarily be a breach of a contract. Learning Objective 1.7

Question 71

The painter contracts to paint the exterior of the home for $1,750 plus the cost of paint and any other necessary materials. About three-fourths of the way through the job, the contractor breaks his leg and can’t finish. The owner offers to pay the contract price less deductions for the cost of having the job completed by another painter, and the original painter accepts the offer. The contract has been discharged under the principle of:

substantial performance.

partial performance.

Impossibility.

mutual agreement.

Answer 71

substantial performance.

Response Feedback:
The answer is substantial performance. Enough was completed to justify payment less deductions for work remaining to be done. Partial performance would mean enough of the work was done to justify full payment. Learning Objective 1.7

Question 72

If the buyer gives notice (without legal justification) that he will not close the purchase of the property and is terminating the contract, is the seller out of luck?:

No, termination of the contract does not terminate the seller’s remedies under the contract, only the seller’s obligation to sell.

Yes, because if the contract is canceled or terminated, it no longer exists and the seller has no recourse.

No, the seller can seek specific performance.

Yes, because the seller should have refused to accept the notice of termination.

Answer 72

No, termination of the contract does not terminate the seller’s remedies under the contract, only the seller’s obligation to sell.

Response Feedback:
The answer is no, termination of the contract does not terminate the seller’s remedies under the contract, only the seller’s obligation to sell. The seller still has recourse; the obligations to sell and purchase may have been terminated but the seller’s right to seek damages is not terminated. Also, specific performance almost always is a remedy pursued by a buyer, not a seller. Learning Objective 1.7

Question 73

In Texas, the test for the adequacy of a legal description in a real estate contract is whether the information allows the property to be described:

with reasonable accuracy and understandability.

within the understanding of the reasonable person provided with all relevant facts.

with reasonable certainty.

by a person with reasonable education and knowledge of the real estate business.

Answer 73

with reasonable certainty.

Response Feedback:
The answer is with reasonable certainty. A street address is not sufficient and in the case of Morrow v. Shotwell, the Texas Supreme Court said that the contract must have a legal description or make reference to an existing document that describes the property “with reasonable certainty.” Learning Objective 1.1

Question 74

Which of these is likely considered a valid legal description?:

4568 Cedarwood Drive, in the City of Fort Worth and the State of Texas

Lot 4, Block 10, Superior Heights 1, County of Sedgewick, State of Kansas

Smothers farm located in Oswego Township, Harvey County, Kansas

All of these

Answer 74

Lot 4, Block 10, Superior Heights 1, County of Sedgewick, State of Kansas

Response Feedback:
The answer is Lot 4, Block 10, Superior Heights 1, County of Sedgewick, State of Kansas. A lot and block description is usually an adequate legal description. Street addresses and property names are not. Learning Objective 1.1

Question 75

In order to be valid, a deed must contain, among other things, the specific geographic location of the property, which is known as:

the legal description.

the legal survey.

the municipality-issued street address.

the title-company-sanctioned address.

Answer 75

the legal description.

Response Feedback:
The answer is legal description. A deed or contract for an interest in real property must contain a valid legal description in order to properly convey title or whatever interest is being conveyed. Learning Objective 1.1

Question 76

Which method of legal description divides property into a variety of smaller parcels, including sections, each of which has 640 acres?:

Rectangular survey system

Lot and block system

Street address system

Metes-and-bounds system

Answer 76

Rectangular survey system

Response Feedback:
The answer is rectangular survey system. The rectangular survey system divides property into a variety of smaller parcels, including sections. The other systems do not make such a division. Learning Objective 1.1

Question 77

Which of the following is NOT a type of recognized system for arriving at a legal description?:

Range and trajectory

Metes and bounds

Lot and block

Subdivision plat

Answer 77

Range and trajectory

Response Feedback:
The answer is range and trajectory. All the others are recognized systems to develop legal descriptions. Metes and bounds and the rectangular survey system are generally used for larger parcels that have not been subdivided, whereas lot and block and subdivision plat are used most frequently for developed property in urban areas. Learning Objective 1.1