Unit 11

Question 1

In a unilateral contract, both parties promise to do something—one promise is given in exchange for another.

Answer 1

False

Question 2

MOST real estate contracts are implied contracts.

Answer 2

False

Question 3

Rescission returns the parties in a contract to their original position, whereas cancellation terminates a contract without a return to the original position.

Answer 3

True

Question 4

Substitution of a new contract for an existing contract is called novation.

Answer 4

True

Question 5

After both a buyer and a seller have executed a sales contract, the buyer acquires an interest in the land. This interest is called equitable title.

Answer 5

True

Question 6

In some states, instead of preparing a complete sales contract, real estate professionals may prepare a shorter document known as a briefer.

Answer 6

False

Question 7

What action returns a contract’s parties to their positions before the contract, including return of any deposit?

Answer 7

Rescission

Question 8

An example of specific performance for breaching a real property purchase contract would be

Answer 8

a court action to force compliance with the contract.

Question 9

A promise for a promise is one way to describe

Answer 9

a bilateral contract.

Question 10

A prospective buyer submits an offer to purchase a residential property. All of the following circumstances would automatically terminate the offer EXCEPT

Answer 10

the seller received a better offer from another buyer.

Question 11

The buyer and seller agreed to a closing date of September 7 and that time is of the essence. Which of these is the closest meaning of the phrase?

Answer 11

Closing must be on or before September 7.

Question 12

In a land contract, the vendee

Answer 12

obtains legal title at closing.

Question 13

A buyer purchased a home under a land contract. In this form of seller-carry lending, the seller

Answer 13

holds the deed to the home until final payment.

Question 14

A buyer and a seller enter a contract for the sale of a three-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?

Answer 14

The parties should amend the contract.

Question 15

The purchaser of real estate under an installment contract

Answer 15

has an equitable interest in the property’s title.

Question 16

A land contract provides for

Answer 16

the conveyance of legal title at a future date.

Question 17

On March 7, a buyer and a seller execute a contract for the purchase of the seller’s property. Closing is set for June 10. On April 15, the property is struck by lightning and destroyed by the resulting fire. If the Uniform Vendor and Purchaser Risk Act has been adopted by the state in which the property is located, which party bears liability for the loss?

Answer 17

Under the act, the seller bears the loss alone.

Question 18

The sales contract says the buyer will purchase only if an attorney approves the sale by the following Saturday. The attorney’s approval is

Answer 18

a contingency.

Question 19

Which of the following describes an executed contract?

Answer 19

All obligations under the agreement have been performed

Question 20

A deposit provided when making an offer to purchase real estate is known as

Answer 20

earnest money.

Question 21

Which of the following is FALSE about assignments?

Answer 21

All contracts must allow assignments.

Question 22

An amendment

Answer 22

changes the contract.

Question 23

The courts usually do NOT inquire into

Answer 23

the adequacy of the consideration provided in a contract.

Question 24

The property owner has given a potential buyer the right to buy the property at a set price for a set period of time; this is

Answer 24

An option

Question 25

All of the following are essential elements of a contract EXCEPT

Answer 25

words of conveyance.

Question 26

An option to purchase binds which of the following parties?

Answer 26

The seller

Question 27

Should the buyer default, an example of liquidated damages to the seller in a purchase contract could be

Answer 27

forfeiture of the earnest money deposit.

Question 28

A buyer and a seller sign a contract to purchase. The seller backs out, and the buyer sues for specific performance. What is the buyer seeking in this lawsuit?

Answer 28

Transfer of the property

Question 29

In a preprinted sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to

Answer 29

have both parties initial or sign in the margin near each change.

Question 30

A contract is said to be executed when it includes

Answer 30

the signatures of the parties.

Question 31

The main difference between an amendment and an addendum is that an amendment

Question 32

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

Answer 32

an executed contract.

Question 33

If a buyer defaults on a purchase agreement and the seller keeps the buyer’s earnest money, which of the following remedies has the seller elected?

Answer 33

Liquidated damages

Question 34

Under what circumstances may a real estate professional practice law?

Answer 34

Only if the real estate professional is also a licensed attorney