Unit 4 Realestate Contracts, Settlement:Closing Procedures, Escrow, and Protations Flashcards
A contract that has NOT yet been fully performed
A. Unenforceable
B. Voidable
C. Executory
D. Executed
C. Executory
Before execution. The contract is executory
A contract that exchanges a promise for performance is
A. Implied
B. Unilateral
C. Bilateral
D. Executory
B. A promise for a promise is bilateral. A promise for performance is unilateral
All of these are essential elements of contract EXCEPT
A. Mutual agreement
B. A lawful objective
C. Consideration
D. Earnest money
D
Earnest Money is not an essential element of a contract. Earnest money is liquidated damages for the seller to retain in the event of the buyers breach
The electrical wiring in a house is defective. The broker who listed the house is aware of this and intentionally deceived a potential buyer about it. The buyer purchases the home and later suffers a financial loss due to the faulty wiring. This is an example of
A. Mistake of law
B. Fraud
C. Mistake of fact
D. Novation
B intentional deceit is fraud
Which of the following requires that real estate sales contracts be in writing?
A. Caveat emptor Law
B. Truth in Lending Act
C. Statute of limitations
D. Statute of frauds
D. Statute of frauds
The statute of frauds requires all real estate contracts (except leases for one year or less) to be in writing
Which of the following statements regarding a purchase agreement is TRUE?
A. The contract is binding on both parties
B. The contract may be oral
C. The contract terms must be identical to the terms in the listing agreement
D. The contract conveys legal title when signed by both parties
A
A purchase agreement is binding on both the buyer and the seller
A contract that conveys the right to quiet enjoyment and use of property but does NOT convey title is a
A. Bill of sale
B. Lease
C. Quitclaim deed
D. Dedication
B. Lease
the lessor or landlord grants the right possession to the lessee (tenant) the lessor retains title
A new contract that transfers all rights and liabilities is
A. An assignment
B. A subordination
C. A novation
D. An option
C. A novation.
A transfer of contract rights and liabilities to another is using a new contract is a novation
A seller may keep the buyers earnest money as a liquidated damages if
A. That is stated in the listing agreement as a remedy for the seller
B. The seller and the broker agree that the buyer defaulted and the contract calls for specific performance
C. The buyer defaults and the purchase agreement stipulated liquidated damages as a remedy
D. The seller failed to perform an essential element of the contract
C. When the buyer breaches the purchase agreement the seller may keep the earnest money as liquidated damages if the purchase agreement provides for that remedy
A contract in which one party purchases the right to buy at a fixed price within a specified period is
A. A purchase agreement
B. A listing agreement
C. A lease
D. An option
D.
In an option the optionee purchased the right to buy
A contract between two parties that legally binds one party to perform but allows the other party to disaffirm it, is
A. Executed
B. Void
C. Voidable
D. Bilateral
C
In most voidable contracts only one of the parties is legally bound to perform
A buyer signed a purchase agreement to buy a home. The seller then decided not to sell. The buyer sued the seller successfully and was able to purchase the house. What was the contract remedy if the seller was in default?
A. Unilateral rescission
B. Mutual agreement
C. Specific performance
D. Damages
C. An order of specific performance requires the defaulting party to perform as agreed in the contract.
When a party is in default in a contract due to missing a payment deadline, the contract is considered to be
A. Breached
B. Executed
C. Unilateral
D. Illegal
A
A party who is in default in a contract is said to be in breach
A commercial lease in which the tenant pays the landlord a base rent, plus share of the gross sales from the tenants business is a
A. Net lease
B. Ground lease
C. Gross lease
D. Percentage lease
D
Percentage leases are used for commercial and retail properties
A commercial lease that requires the tenant to pay a percentage of the property’s operating expenses is a
A. Percentage lease
B. Net lease
C. Gross lease
D. Standard lease
B
In a net lease the tenant pays a base rent plus some or all of the operating expenses
A landlord has not paid the utility bills for his apartment building, so the heat, water, and electricity are shut off. Because of this, the tenants move out and have the right to terminate their leases. Which of the following legal concepts does this example illustrate?
A. Constructive eviction
B. Mutual rescission
C. Actual eviction
D. Eminent domain
A
In a constructive eviction the tenant terminated the lease because the landlord has caused or permitted a substantial interference with the tenants use and enjoyment of the property
Upon acceptance and communication of acceptance, an offer is considered to be
A. A counteroffer
B. Unilateral
C. A contract
D. Valid
C
Upon communication of acceptance the offer becomes a contract. The offer and contract could be invalid if they were missing an essential element such as competent parties
If a commercial tenant only pays rent the tenant MOST likely has a
A. Gross lease
B. Net lease
C. Percentage lease
D. Ground lease
A
In a gross lease the tenant pays only rent and the landlord pays all expenses. It is typically used in residential leasing but could also be used for commercial properties.
In an executory purchase contract, the buyers interest is described as
A. Legal title
B. Ownership in equity
C. Naked legal title
D. Free and clear title
B
Under a purchase agreement or a contract for deed, the buyer holds equitable title. The seller holds legal title until the seller delivers the deed to the buyer
The buyer and the seller have entered into a binding contract for sale. However before closing the law changes and the buyers intended use of the property becomes illegal. Which is TRUE?
A. The contract is valid and enforceable under the rules of risk.
B. The contract is terminated due to fraud by the seller
C. The contract is void due to impossibility of performance
D. The contract is valid but the price must be renegotiated
C
When a change in law makes the purpose of a contract illegal, it is void due to impossibility of performance (it now lacks a legal purpose)
Consideration could be all of the following EXCEPT
A. A promise
B. Money
C. Something of value
D. Earnest money
D
earnest money is a remedy for default and not part of consideration
Two forms of eviction are
A. Sheriff and trustee
B. Actual and constructive
C. Landlord and tenant
F. Judicial and sufferance
B
Actual eviction is what a landlord uses when tenants are in default; constructive eviction is what tenants may claim if the landlord is in default.
When the buyer is in default and the seller keeps the earnest money, the contract MOST likely provided for
A. Specific performance
B. Actual damages
C. Executed damages
D. Liquidated damages
D
Earnest money is what the buyer gives the seller in case the buyer defaults on the contract. It is typically the only thing the seller will receive in liquidated damages contract.
Alice is a minor who entered into a contract to sell Bob the house she had inherited. This contract is MOST likely
A. Valid
B. Void
C. Voidable by Bob
D. Voidable by Alice
D
Contracts with a minor are voidable by the minor not the adult
The remedy for parties in default that is available to both the buyer and the seller in a purchase contract is A. Specific performance B. Liquidated damages C. Actual damages D. Lis pendens
A. Specific performance is the only standard remedy for default that is available to both parties in a purchase agreement.
The seller told the buyer that the property had no roof leaks. But when the buyer had the property inspected a roofing contractor found leaks and said they had been leaking for months. The contract between the seller and the buyer is probably
A. Void
B. Voidable
C. Valid
D. Implied
B
The contract is voidable due to fraudulent misrepresentation of the condition of the property
Contracts that transfer interests in real estate should be
A. Implied contracts
B. Unilateral contracts
C. Bilateral contracts
D. Express written contracts
D.
Express (meaning that the terms are specifically identified in the contract) written contracts are used in the transfer of real estate
A contract between two parties who each make a promise to perform certain acts is called A. A bilateral contract B. A unilateral contract C. An implied contract D. A voidable contract.
A.
A bilateral contract contains a promise from each party
A real estate contract with a minor is
A. Voidable
B. Void
C. Unilateral
D. Illegal
A voidable
The contract is voidable because the minor could disaffirm it
A purchase agreement would likely be voidable under all of these circumstances EXCEPT
A. The purchaser is a minor
B. The seller signed under duress
C. The buyer didn’t read or understand the contract
D. The seller made a material misrepresentation to the buyer
C.
Failure to read the contract does not allow a party to withdraw
