Contracts

Kenneth enters into a contract to sell his home to Valerie, who puts down a $5,000 earnest money deposit. At the last minute, Valerie backs out of the deal. Kenneth keeps the earnest deposit. This is an example of ______. A. Accepting liquidated damages B. Accepting partial performance C. Suing for damages D. Suing for specific performance

A. Accepting liquidated damages Options C and D aren't correct because Kenneth isn't filing a lawsuit. Liquidated damages provide a specific compensation amount in the event of a breach

Camille, a buyer, wants to change the price already agreed to in a sales contract. She should use a(n) ______. A. New contract B. Amendment C. Addendum D. Bill of sale

B. Amendment An amendment changes existing contract terms. Once signed by both parties it becomes part of the contract, with the same legal weight as the original contract. The remaining terms in the original contract remain the same.

Tristan's offer has been signed by all parties and delivered back to the seller. This means that ______ has occurred. A. Acceptance B. Binding acceptance C. Personal delivery D. Notarization

B. Binding acceptance

Jerry and Lewis have entered into a sales contract. They're about three weeks into the transaction, with several terms of the agreement yet to be met. What type of contract do Jerry and Lewis have? A. Unilateral B. Executory C. Option D. Executed

B. Executory A valid contract that is in progress is an executory contract, which means that one or more terms of the agreement remain undone

What happens to an initial offer from the buyer after a seller counters? A. It becomes the back-up offer. B. It's no longer in play. C. It's accepted by the seller until the buyer accepts the counter. D. Sellers cannot counter a buyer's initial offer.

B. It's no longer in play.

Seller Gina feels awful that Martha, who was going to buy Gina's property, lost her job. Gina decides to ______ Martha from her obligation to pay earnest money, so that money is returned to Martha. A. Rescind B. Release C. Reform D. Assign

B. Release Rescission is when both parties mutually agree that it makes sense to terminate the contract. Release is when one party wants out and the other agrees to release that party from any obligations.

Jerry and Simon signed a contract so that Jerry could purchase all of Simon's restaurant equipment for one price after Simon closes his restaurant next month. The contract contains a provision that states Jerry has one year from the purchase date to file a suit relative to the purchase. After the year is up, Jerry forfeits the right. What kind of contract clause is this? A. Specific time B. Statute of limitations C. Time is of the essence D. Time of performance

B. Statute of limitations

What's the meaning of "good faith" in relation to contract law? A. The contract was formed without undue influence or duress. B. The parties agree to arbitration or mediation instead of legal action as a means of settling any disputes. C. The parties agree that they'll execute the contract to the best of their ability and without any fraud or misrepresentation. D. The contract terms are written to be equally beneficial to each party.

C. The parties agree that they'll execute the contract to the best of their ability and without any fraud or misrepresentation.

Sondra thinks the new business contract she's signed with her business partner is valid. Both parties are legally competent, the purpose is a business transaction so it's a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered? A. Whether the contract is in writing. B. Whether the parties are over 21. C. Whether consent was voluntary. D. Whether the contract has been translated into all possible languages.

C. Whether consent was voluntary

Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of contract do Desmond and the Harpers have? A. Executed B. Mutual C. Bilateral D. Unilateral

C. Bilateral A contract involving two parties who both make a promise to the other party in exchange for consideration is a bilateral contract.

Breanna signs a contract offering to purchase Kathy's home for $150,000. Kathy replies, "No way," but offers to sell it to her for $200,000. Breanna agrees to these terms and they add their signatures. Which of the following statements is correct? A. The contract is valid, but unenforceable. B. The contract is invalid. C. Breanna accepted the offer Kathy made. D. Kathy accepted the offer Breanna made.

C. Breanna accepted the offer Kathy made.

Tawna agrees to sell her small plot of land to Morris for $5,000 cash. They don't write up a contract, but otherwise all the necessary elements for a valid contract are in place. What's the status of this contract? A. It's void. B. It's valid and enforceable. C. It's valid but not enforceable. D. It's illegal.

C. It's valid but not enforceable. An oral contract for the transfer of real estate isn't enforceable in a court of law, but it's a valid contract.

Kendra made an offer on Sam's property. Sam rejected Kendra's offer, but made a counter-offer. Kendra is now considering the counter. What is Kendra in this scenario? A. Executor B. Offeror C. Offeree D. Trustor

C. Offeree

Which offer would be the most appealing to a seller? A. An all-cash offer $15,000 over list price, closing in two weeks. B. An offer $10,000 over list price, contingent upon appraisal and inspection, conventional financing with 20% down, closing in 30 days. C. A full-price offer waiving inspection, conventional financing with 20% down, closing in 45 days. D. It depends on the needs and motivations of the seller.

D. It depends on the needs and motivations of the seller.

You're explaining to your client that using electronic documents and signatures simplifies the homebuying process. Your client is skeptical about these signatures. You describe the Uniform Electronic Transactions Act (UETA) and tell your client that ______. A. UETA provides a guarantee that electronic signatures will hold up in court B. UETA gives electronic signatures the legal weight to override any existing "wet" signatures C. UETA requires states to permit electronic signatures on all real estate-related documents D. State laws take precedence over UETA

D. State laws take precedence over UETA The UETA is an attempt to standardize acceptance of electronic documents and signatures, but state laws govern the use of these electronic items, and will take precedence of the UETA.

Katelyn really wants to include an inspection contingency in her purchase offer. Her agent explains that the inspection contingency only documents which of the following? A. How much money the sellers will spend on fixing inspection issues B. The inspector who Katelyn will use C. Whether Katelyn will ignore some of the inspection issues D. The date by which all inspection issues must be addressed

D. The date by which all inspection issues must be addressed

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 back. Even after the summer was over the transaction still hadn't closed. Gail was guilty of not adhering to which aspect of the contract? A. Assignment B. Novation C. Reasonable time D. Time is of the essence

D. Time is of the essence

Ken signed a contract to purchase Debra's condo. Ken signed the contract two weeks prior to turning 18, which is the age of majority in their state. Debra found out about his age prior to the closing but honored the contract and they closed on the condo a month after Ken's birthday. What was the status of the contract when Ken and Debra entered into it? A. Executed B. Illegal C. Void D. Voidable

D. Voidable The contract COULD have been cancelled, because it was missing one of the essential elements: a legally competent party (Ken was a minor when he entered into the contract). However, parties to a voidable contract may choose to follow through with—or execute—it