Contracts

Which of the following individuals would be a competent party to a contract?

Graciella, a 28-year-old unemployed parolee

Brandon wants to sell his house via an installment land contract. Which of the following is an advantage that he could realize?

He will be able to attract more potential buyers.

Alex, a high school freshman, started a neighborhood lawn care business. Simone decides to hire Alex to mow her lawn every two weeks. Alex presents Simone with a written contract outlining the services to be provided and the fee Simone will pay. Which of the following is true in this situation?

If both parties are content to uphold their agreement, the fact that it's not legally binding doesn't matter.

Which of the following describes a contract that exists based not on words, but on the parties' actions or behaviors?

Implied

Which of the following is a contract that exists based on an understanding or assumption, rather than on specifically defined terms?

Implied contract

Which of the following is an agreement with your broker that covers the terms of your relationship, including compensation?

Independent contractor agreement

Glynnis is ready to close on her new house, but her agent told her that they have to wait for the homeowner to fix the electrical box as agreed. What clause in her contract allowed her to request the repair?

Inspection contingency

Which of these best describes how a binder is used?

It acts like a letter of intent from a potential buyer to a seller.

If two parties enter into a contractual agreement with each other to perform an illegal act, which of the following statements is true of the contract?

It is void because it is not for a lawful purpose.

Which of the following is a contract that outlines the terms of a property rental arrangement between a landlord and a tenant?

Lease

Which of the following is an essential element of a valid real estate contract?

Legal purpose

What are the essential elements of a valid real estate contract?

Legally competent parties Offer and Acceptance Consent Legal Purpose Consideration

Marcus is a buyer who has agreed to purchase Lydia's property using a land contract. Who holds legal title to the property during the term of the loan?

Lydia

In a purchase offer, is earnest money required in order to have a binding contract?

No, because the buyer's consideration is the promise to buy.

Kirk and his cousin Dewey decided to buy a vacation home. They entered into a contract with the seller, Crystal. Before finalizing the sale, Dewey wanted out, but he didn't want to let his cousin down. So instead of pulling out altogether, Dewey convinced his son to replace him in the purchase contract. Kirk and Crystal agreed to the substitution, and Dewey was released from all his obligations under the contract. Dewey's son is now the contracting party. What's this an example of?

Novation

What's the key difference between assignment and novation of a contract?

Novation releases the original party from all obligations, while assignment does not.

Which element of a valid contract is established by getting the signatures of all parties?

Offer and acceptance

Sue Ellen has a contract to buy Roger's house, which she has always admired, when Roger decides he's ready to move to a senior living community. After Roger finds a suitable senior apartment and moves, Sue Ellen writes a check for the agreed-upon amount, and Roger transfers the deed to her. What is happening in this scenario?

Performance

Tyne entered a contract to buy Fred's home. Per the terms of the contract, Tyne agreed to pay $20,000 in earnest money by this coming Wednesday and have the property inspected within seven days. She submitted the earnest money deposit on time and had the property inspected within five days. What action does this scenario exemplify?

Performance of this part of the contract

Which of these situations represents a unilateral contract?

Sherry promises to give Brent a ride home from work, and then doesn't show up.

Which of the following is the best definition of a contingency?

A condition that must be met before the sales contract is complete and enforceable

Which of the following defines a listing agreement?

A contract between a broker and a seller outlining the brokerage's right to market the property in exchange for a commission if the property sells

Which of the following defines an option to purchase?

A contract between a seller and a potential buyer that gives the potential buyer the right to make an offer on the seller's property but does not obligate him to do so

Which of the following best describes a bilateral contract?

A contract that involves an exchange of consideration between two parties

What is an installment sales contract?

A contractual agreement in which the buyer pays the seller the purchase price over time

According to the statute of frauds, which of the following contracts is not required to be in writing to be valid?

A lease for a term shorter than one year

What's a binder?

A written outline of the sales transaction

When Dashiell received the purchase offer for his bungalow, he was surprised to see a page added to the contract requesting that an attorney review the contract. What is Dashiell looking at?

Addendum

Your brokerage firm uses pre-printed sales contract forms, but your seller, Marcus, wants to add some language about staying in the house and renting from the buyer for a month after closing. What should you use to add this information?

Addendum

Your buyer, Billy, wants to make an offer on the craftsman house he saw today, but he wants the sellers to start the paperwork for a tax reassessment before closing. This isn't part of the standard sales contract in your area. What will you use to accomplish this request?

Addendum

Buyer Daphne and seller Kurt signed a sales contract with a definite closing date of May 15. Daphne then learned that she needed to move the closing date to June 15. What document should she use to make this change?

Amendment

Camille, a buyer, wants to change the price already agreed to in a sales contract. What document should she use?

Amendment

The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?

Amendment

Which of the following is true about the statute of frauds?

Any form of written contract, including email communication, may be considered "in writing" and binding.

Mary agreed to buy her mother's house when her mother planned to move to a senior living community. They signed a purchase agreement, but when Mary had to move because of work, she signed her rights in the contract over to her sister, Tina. Mary may still owe money if Tina can't come up with the agreed-upon funds. What's happening in this scenario?

Assignment

Binders create the framework for a contract but may lack specifics, such as ______.

Contingencies

Real estate sales contracts must be valid, express, bilateral, ______, and executed or executory.

Enforceable

When a contract is executory (such as in an installment sales contract), what type of title does the buyer hold?

Equitable

Your clients, the Braeburns, have signed a land installment contract to purchase a property. What rights do the Braeburns receive?

Equitable title and possession of the property

Alex and Michael Helbig signed a contract to purchase their first home from sellers Joe and Bonnie Watson. Once closing occurred and all closing requirements wrapped up, the Helbigs were given the keys to their house. What type of contract do they have at this point ?

Executed

In which of the following types of contracts does one or more of the contract's terms still need to be completed?

Executory

Which of the following is true regarding express agreements?

Express agreements may be written or verbal.

Rex needs to handle some money he acquired during an "unsavory" business deal. He agrees to sign his boat over to his colleague, Ben, if Ben can launder the money and return it to Rex as part of a legal business deal. What kind of contract do Rex and Ben have?

Void

You sign a contract to purchase a machine that will allow you to travel back in time and meet Abraham Lincoln. Assuming that time machines don't actually exist (for now), what type of contract is this?

Void

Sylvia, who's 15 years old, and her neighbor Marge, who's 24, sign an agreement that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

Voidable

Which type of contract is the opposite of an express contract?

implied

An installment sales contract may also be known as a _____.

installment land contract

Clark is selling his home to Myrna. Clark will retain the title to the property until Myrna has paid the loan in full. What type of financing is used in this transaction?

installment land contract

Which of the following requires that contracts transferring ownership of real property be in writing to be enforceable?

Statute of frauds

What's one of the required elements of a valid option contract?

The amount of consideration the optionee is paying the optionor

Which of the following is a potential concern for a buyer entering into a land installment contract?

The buyer could lose the property after missing only one mortgage payment.

Consent is not present when _______.

The contract is signed under duress or undue influence

How did the decision in Naldi v. Grunberg interpret the New York Statute of Frauds definition of "in writing"?

The court ruled that an agreement made via email communication can be considered a binding contract.

Which of the following statements about the number of contingencies in a sales contract is true?

The inclusion of numerous contingencies makes it less likely that the buyer's offer will be accepted.

If a minor enters into a contract with an adult, which of the following is true?

The minor may legally hold the adult to the contract, but the adult cannot legally hold the minor to the contract.

Harini had signed a lease with an option to buy on her condo since she wasn't financially stable enough to purchase the condo when she first signed the lease. Two years later, Harini was in great financial shape, but she found out that the owner legally sold the condo to another buyer. Harini has to move out next month. What must have happened?

The option expired.

Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?

The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.

Which of the following is true about binders?

They are also called purchase offers.

Walt and Ginger's landlord told them that their option to purchase the bungalow they're renting had just been terminated. Which of the following actions is most likely to have caused the termination?

They sublet the bungalow for a month without permission.

Two intoxicated co-workers sign a contract in which they agree to marry each other if they're both still single when they reach age 40. Which of the following is true about this contract?

This is a voidable contract because the parties were intoxicated at the time they signed it.

You're talking to a co-worker at lunch, and she mentions she has a box of baby clothes her kids have outgrown that she needs to get rid of. You have a baby on the way, so you offer to pay her $25, and she agrees to bring the box to work the next day and give it to you. Which of the following is true in this situation?

This is an express contract because you defined in words the specific terms of the agreement and consideration to be exchanged.

Gail was supposed to close on her new home by the end of May, but she kept asking the sellers if they could push the closing date back. Soon the summer was over, and she still hadn't closed. Gail was guilty of not adhering to which aspect of the contract?

Time is of the essence

Garrett wanted to move his real estate closing to a date after his wedding. His broker and attorney encouraged him not to do it because of which contract clause?

Time is of the essence

What phrase do many real estate contracts contain that reminds the parties to avoid unnecessary delays to the transaction, and to adhere to all contract dates?

Time is of the essence

The statute of frauds states that if a contract transferring ownership of real property is not in writing, it's ______.

Unenforceable

Hank leases 150 acres from Sara and Jesse. He has an option contract attached to his lease, with an option to purchase that can be exercised within the next two years. What type of contract is this?

Unilateral

You receive an offer in the mail that says you're eligible to win a cash prize if you place some stickers on a form and return it to the sender. What type of contract is this?

Unilateral (a promise of cash)