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Unit 12: Review
Stack #2751513
| Question | Choices | Answer |
|---|---|---|
| An agreement to be bound by most of the terms proposed in an offer constitutes acceptance. T F | An agreement to be bound by all of the terms proposed in an offer constitutes acceptance. | |
| All contracts must be in writing to be enforceable. T F | False. While a contract may be written or oral, only certain types of contracts must be in writing to be enforceable | |
| A contract is only valid if it contains a binder | False. A contract is valid when it meets all the essential elements that make it legally sufficient and legally binding. A binder is often used in commercial transactions to present a buyer's offer. | |
| Consideration is something of legal value offered by one party and accepted by the other as an inducement to act. T F | True. Consideration is some interest or benefit accruing to one party, or some loss or responsibility by another party as inducements to perform or to refrain from performing some act. | |
| In an implied contract, the actual agreement between the parties is inferred from general or vague statements in the written agreement itself. T F | False. In an implied contract, the actual agreement between the parties is demonstrated by their acts and conduct. | |
| The difference between a bilateral and a unilateral contract is the number of parties involved. T F | False. The difference between a bilateral contract and a unilateral contract is the number of parties bound to perform; both parties to a bilateral contract are obligated to perform, but in a unilateral contract, the second party is not legally obligated to act. | |
| A sales contract is an executory contract from the time it is signed until closing; at closing, it becomes an executed contract. T F | True. An executory contract exists when one or both parties still have an act to perform; a sales contract is executory from the time it is signed until closing. | |
| A contract that may be rescinded or disaffirmed by one or both of the parties based on some legal principle is void, even though it may appear to be valid. T F | False. A contract that may be rescinded or disaffirmed by one or both of the parties based on some legal principle is voidable, even though it may appear to be valid. | |
| The person who makes an offer is the offeree; the person who accepts or rejects the offer is the offeror. T F | False. The person who makes an offer is the offeror; the person who accepts or rejects the offer is the offeree. | |
| The essential elements of a contract are offer and acceptance, consideration, legal purpose, and consent and performance. T F | False. The essential elements of a contract are offer and acceptance, consideration, legal purpose, consent, and legal capacity. Performance is an element of discharging the contract. | |
| An oral agreement for the sale of real estate is unenforceable. T F | True. Because the statute of frauds requires that any transfer of real property interests must be in writing, an oral purchase agreement is unenforceable. | |
| Under a land contract, the buyer obtains both possession and legal title to the property by agreeing to make regular monthly payments to the seller over a number of years. T F | False. Under a land contract, the buyer obtains possession, but the seller retains legal title until the terms of the contract have been satisfied. | |
| Assignment is the substitution of a new contract in place of the original one, while novation is a transfer of rights or duties under a contract. T F | False. Novation is the substitution of a new contract in place of the original one, while assignment is a transfer of rights or duties under a contract. | |
| An offer or counteroffer may be revoked at any time prior to its acceptance. T F | True. The offeror may revoke the offer any time before notification of acceptance, but the revocation must be communicated to the offeree by the offeror, either directly or through the parties' agents. | |
| An option is a contract by which the optionee gives the optionor the right to buy or lease property at a fixed price within a specific period of time. T F | False. An option is a contract by which the optionor gives the optionee the right to buy or lease property at a fixed price within a specific period of time. | |
| The Uniform Vendor and Purchaser Risk Act provides that the buyer bear any loss for damage to the property that occurs before title passes or the buyer takes possession. T F | False. The Uniform Vendor and Purchaser Risk Act provides that the seller bear any loss for damage to the property that occurs before title passes or the buyer takes possession. | |
| The interest held by a buyer during the time between the signing of a sales contract and the transfer of title is called equitable title. T F | True. After both buyer and seller have executed a sales contract, the buyer acquires an interest in the land, called equitable title. | |
| An example of an addendum to a real estate sales contract is an attached page that adds a detailed provision that the purchase is contingent on the sale of the buyer's current home within 90 days. T F | True. An addendum is any provision added to an existing contract without altering the content of the original; it is essentially a new contract between parties that includes the provisions of the original contract by reference. | |
| An option is a unilateral contract. | True. Because an option is enforceable by the optionee only, it is a unilateral contract. | |
| A real estate contract entered into by a minor is void. | False. A voidable contract is considered by the courts to be valid if the party who has the option to disaffirm the agreement does not do so within a period of time. A contract entered into by a minor is voidable. | |
| Which of these is an example of a unilateral contract? A) Lease B) Listing agreement C) Agreement of sale D) Option | In a unilateral contract, only one party is obligated to perform. The optionor-owner of the property must sell at the agreed-upon price only if the optionee decides to buy. | |
| A seller accepted all of the terms that the buyer offered, making only one small change in the amount of the earnest money. At the moment, these agreements constitute A) a counteroffer. B) an offer. C) an executed contract. D) an acceptance | Proposing any deviation from the terms of the offer is considered a rejection of the original offer and is called a counteroffer. | |
| After making an offer but prior to receiving any response from the seller, a buyer changed her mind about buying a particular lot. She called her agent and said, "Withdraw my offer." Her action is called a A) rejection. B) breach of contract. C) revocation. D) counteroffer. | The buyer may revoke her offer anytime until she is notified that the seller has accepted the offer. | |
| A real estate broker announces to the salespeople in her office that she will pay a $1,000 bonus to the top-selling salesperson each quarter. This contract is an A) express bilateral contract. B) implied unilateral contract. C) express unilateral contract. D) implied bilateral contract | The offer of a bonus to the top-selling salesperson each quarter is an express contract because the broker clearly stated her intentions in words to the salespeople. It is a unilateral contract because she is obligated to keep her promise, but the salespeople are not obligated to perform. | |
| A buyer makes an offer on a house, and the seller accepts in writing. What is the current status of this relationship? A) The buyer and seller have an express, bilateral executory contract. B) The buyer and seller have an implied, unilateral executory contract. C) The buyer and seller have an express, bilateral executed contract. D) The buyer and seller do not have a valid contract until the seller delivers title at closing. Explanation Because the seller has promised to sell and the buyer has promised | Because the seller has promised to sell and the buyer has promised to buy, it is clearly a bilateral contract. It is express because they announced their intentions in writing. The contract is executory because the sale has not yet closed. | |
| A woman offers to buy a man's house for the full $215,000 asking price. The offer contains this clause: "Possession of the premises on August 1." The man is delighted to accept the woman's offer and signs the contract. First, however, the man crosses out "August 1" and replaces it with "August 3," because he won't be back from vacation on the first of the month. He then begins scheduling movers. What is the status of this agreement? | A) The man has accepted the woman's offer. Because the reason for the change was out of the man's control, the change is of no legal effect once he signed the contract. B) The man has rejected the woman's offer and made a counteroffer, which the woman is free to accept or reject. C) While the man technically rejected the woman's offer, his behavior in scheduling movers creates an implied contract between the parties. D) Because the man changed the date of possession rather than the amount, the man and wo | Even changing the smallest of terms, for whatever reason, constitutes a rejection and counteroffer that the other party is not under obligation to accept. |
| A contract that is entered into by a person who is under the age of contractual capacity is | A) valid. B) void. C) unenforceable. D) voidable | The underage party may void the contract, but the older party who entered into the contract with the minor cannot. |
| A woman is buying a man's house and wants to take over the mortgage. The lender releases the man from the obligation, substituting the woman as the party liable for the debt. This new agreement is called | A) a consideration. B) an assignment. C) a conversion. D) a novation. | Substituting a new contract where the intent is to discharge the old obligation is called novation. |
| Unit Review × Test Id: 66005587 Question #29 of 45 Question ID: 650681 A buyer and a seller enter into a sales contract for the sale of a home. The seller changes his mind at the last minute, and the buyer suffers a financial loss of $1,500 and must rent a home in which to live. Unless the contract provides otherwise, all of these are legal actions that are likely to succeed EXCEPT | A) the buyer may sue the seller for damages to recover the $1,500 loss. B) the seller is not liable because the buyer should not have incurred the $1,500 cost before the sale. C) the buyer may sue the seller for the rent he paid. D) the buyer may sue the seller for specific performance, forcing the sale of the home to the buyer. | In this case, the seller breached the contract without legal excuse. The buyer is likely to be successful if he sues the seller for specific performance, for the $1,500 loss, and for the cost of rent as a hardship. However, many contracts limit the remedies available to parties. |
| 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? | A) Under the act, the seller bears the loss alone. B) Under the act, the buyer and the seller share the loss equally. C) Under the act, neither the buyer nor the seller bears the loss. A state fund covers the loss. D) The act does not apply. The buyer bears the loss alone, by virtue of his equitable title. | In states that have adopted the Uniform Vendor and Purchaser Act, the seller remains responsible for the property until the day of closing. |
| A buyer makes an offer to buy a seller's house. Pursuant to this offer, the buyer is obligated to perform only if the buyer is first able to sell her condominium. This is an example of | A) a mortgage contingency. B) a time-is-of-the-essence contingency. C) a property sale contingency. D) an option contingency. | A property sale contingency protects a buyer who has to sell a property in order to buy the seller's property. |
| All of these are essential to a valid real estate sales contract EXCEPT | A) offer and acceptance. B) legally competent parties. C) consideration. D) an earnest money deposit, held in an escrow account. | Earnest money is an optional term in a contract, not a requirement. The essential elements of a contract are offer and acceptance, consideration, legally competent parties, consent, and legal capacity. |
| A 14-year-old comes into a brokerage office and says, "I want to make an offer on this property. Here is a certified check for 10% of the asking price. Please help me with the paperwork." Why should the broker be concerned? | A) The sales contract may be disaffirmed by the minor. B) The sales contract will be void because the minor's age is a matter of public record. C) Because one of the parties is a minor, the contract is illegal. D) The earnest money deposit must be at least 20% of the asking price when a minor is involved in the transaction. | A minor may void the contract by saying, "I am underage." A minor's guardian may purchase for the minor. |
| In case the buyer decides not to buy for no legal reason, the contract may provide that the earnest money is there as | A) actual damages. B) liquidated damages. C) nominal damages. D) punitive damages | Liquidated damages limit the compensation available to the injured party should a breach of contract occur. |
| 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? | A) If either party gives notice, the date can be moved back. B) Closing must be on or before September 7. C) The date of closing may only be delayed by one day at a time. D) If closing is not held on September 7, there is an automatic extension built in. | Time is of the essence requires that the contract be completed during that time frame; otherwise, the party who fails to perform on time is liable for breach of contract. |
| Which of these is NOT typically a factor in determining the amount of the earnest money deposit? | A) Whether it is an amount sufficient to cover the broker fees B) Whether it is an amount sufficient to discourage the buyer from defaulting C) Whether it is an amount sufficient to compensate the seller for taking the property off the market D) Whether it is an amount sufficient to cover any expenses the seller might incur if the buyer defaults Explanation Broker fees are not the focus when the parties are working out an agreement concerning the earnest money deposit. Previous NextGo to Summary | Broker fees are not the focus when the parties are working out an agreement concerning the earnest money deposit. |
| If a man threatens another man with violence in order to get him to sign a contract to sell property for a low price, the contract is voidable because there is lack of | A) consideration. B) consent. C) discharge. D) offer and acceptance. | Because a contract must be entered into by consent as a free and voluntary act of each party, a contract made under duress deprives a person of that ability. The contract is voidable by the injured party. |
| If a contract seems to be valid, but neither party can sue the other to force performance, the contract is said to be | A) voided. B) breached. C) rescinded. D) unenforceable. | An unenforceable contract may appear to be valid; however, neither party can sue the other to enforce performance. |
| What is minimum consideration in a valid contract? | A) One dollar B) Specified goods or services C) Anything the parties agree is good and valuable D) Any item that can be appraised with a market value | The parties must agree that the consideration is good and valuable. The courts do not consider whether the consideration is adequate. |
| If a contract does NOT contain a time or date for performance, the act should be done within | A) one week. B) two weeks. C) one month. D) a reasonable time. | Interpretation of what is a reasonable time depends on the situation. However, courts have sometimes declared contracts invalid if they did not contain a time or date for performance. |
| If a man allows a woman to back out of a contract, returns the earnest money to her, and both are back to the positions they held before the contract, the contract has been | A) rescinded. B) cancelled. C) assigned. D) executed. | Rescission allows both parties to return to their original positions before the contract, so any monies exchanged must be returned. |
| When is an offer considered to be accepted? | Test Id: 66005587 Question #42 of 45 Question ID: 650694 When is an offer considered to be accepted? A) The moment the seller accepts the buyer's offer B) When the broker notifies the buyer that the seller has accepted the offer C) When the buyer gives a signed receipt to the broker to show the buyer has received the acceptance D) One business day after the offer is accepted and signed by the seller | Buyer notification is the key. It is not an accepted offer until the buyer is notified, and there is no lag time after that point. |
| Additional conditions that must be satisfied before a sales contract is fully enforceable are called | A) contingencies. B) addenda. C) amendments. D) binders. | A contingency is any additional condition that must be satisfied before a sales contract is fully enforceable. A binder is a short version of a sales contract that is used until a more complete version is composed by a lawyer. |
| The amount of the earnest money in a sales contract should | A) cover any expenses the buyer might incur if the seller defaults. B) discourage the buyer from walking away from the agreement. C) pay for any required inspections. D) pay the broker's commission. | The amount of earnest money should be sufficient that the seller feels reassured that the buyer is committed to the purchase. Money is not used to pay for inspections or the broker's commission. |
| The term statute of limitations is BEST described as the limitation on the | A) broker's right to a commission. B) parties' abilities to demand a "time is of the essence" clause in a sales contract. C) amount of damages that can be claimed in the event of breach. D) time period in which parties to a contract may bring a lawsuit to enforce their rights. | Every state limits the time during which parties to a contract may bring a legal action to enforce their rights. Rights not enforced within the applicable time period are lost. |
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Jackeeking30
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