Contracts

Language placed in a contract linking performance to the happening of a certain event, may be known as all the following except:

Affirmation

Which of the following is used to change an already binding contract?

An amendment

Seller received an offer subject to the sale of the offeror's house which has been sitting on the market for a while. If the seller likes the offer but does not wish to wait indefinitely, what should the seller include as a condition of his acceptance?

An escape clause

When a contract shows the full intentions of the parties, it is considered to be

An expressed contract

A broker listed property for $450,000 and received an offer at $420,000 which he presented to the seller. The seller is considered to be

An offeree

A unilateral contract that involves a promise to sell property at a set price during a certain period is known as:

An option

Susan obtained a one-year option on a commercial lot in the amount of $600,000. Two months later she was approached by a national automotive chain who was looking to purchase a similar property and indicated that they're willing to pay $1 million for the same lot. What is the easiest and least expensive way for Susan to profitably dispose of her option contract?

Assign her option to the national chain for a profit of $400,000

If an option contract does not contain an assignment clause, the contract is

Assignable

After getting her offer accepted on commercial property, Susan discovered that she cannot obtain financing on the property and assigned her sales contract to Jo who eventually discovered that the property was contaminated and assigned the contract to Bill who indicated willingness to buy the property because the seller was willing to decrease the price. Which of the following ended up holding equitable title?

Bill

Susan placed a deposit to purchase property and later changed her mind. The seller refused to refund her deposit and she walked away from the transaction. Susan's action is an example of

Breach

At what point is a sales contract binding on the parties?

Buyer made an offer, seller accepted, buyer is notified

Which of the following creates a valid executory purchase agreement?

Communication of acceptance to the offeror

What is true regarding the option fee?

Consideration for an option contract which is nonrefundable

In an effort to be released from obligation under a lease, Susan introduced Tom who was interested in the space and who was willing to sign a new lease with the landlord replacing the existing lease. Which of the following is true?

Creating a new lease to replace the old one is an act of novation

Tom makes an offer on a house through the listing agent. The offer is emailed to the seller who remains undecided for a few days during which time Tom decides not to buy the house and emails the listing agent. The listing agent tells Tom that the seller had finally accepted the offer two hours before receiving Tom's withdrawal email. What is the status of the transaction?

Null and void

A land developer signs a purchase agreement (sales contract) to purchase 50 acres from a farmer and the contract has no contingencies. Later the developer is unable to raise enough funds to close the transaction and defaults on the purchase. The farmer can do all the following except

Obtain a deficiency judgment

At what point is an offer to purchase binding on the parties?

Offer is made with or without EMD, accepted, offeror is notified

A sale of commercial property was subject to a valid, executory sales contract when the seller filed bankruptcy and the buyer's attorney notified him that the contract has been terminated. Which of the following terminated the contract?

Operation of law

All the following are required to validate a contract except:

Performance

An accepted offer stated that closing must take place on or before June 15. The buyer was not able to get financing until July 10 and the seller was willing to close even though the contract deadline had expired. Can the parties close the transaction and if so, what are the requirements?

The parties can close but need to sign an amendment to extend the deadline

A novation is best described as

The replacement of an existing contract with a new one

Jeffrey is buying property subject to obtaining a loan. The financing contingency would usually include all the following except:

The secondary market that his loan will be sold to

Lawrence, the buyer, made an offer on 123 Main St. and his agent sent it to the listing agent on Tuesday. The seller did not immediately respond, and Lawrence asked the agent if he can buy a different property. What should the agent do?

The selling agent should revoke the earlier offer on 123 Main St. before making a new one

Helen discovered that her neighbor's privacy fence was encroaching over 6 feet of her property, a situation that has been going on since 1985. Upon contacting the neighbor who refused to move his fence she consulted an attorney who advised her that she did not have a strong case in court because of

The statute of limitations

All the following may render the contract voidable with the exception of

Specific performance

The breach of contract remedy that would force a seller to complete a contract of sale (purchase agreement) is:

Specific performance

Which of the following is not an option for the seller if the buyer refuses to close the transaction?

Sue for an estoppel

After delaying closing a transaction despite a valid purchase agreement, the buyer notified the seller that he was not interested in the property anymore and indicated that the seller can keep the EMD. The seller felt that the buyer misled him into taking the property off the market which led to missing many opportunities to sell the property for possibly more money. What can the seller do to compel the buyer to close?

Sue for specific performance

On June 1, John received a one-year option to buy property for $600,000. On July 15 John emailed the seller an offer for $500,000 but she rejected it. On September 25 it was announced that there will be a new shopping mall and a hospital built in the vicinity which was great news for John who immediately contacted the seller to exercise his option, but the seller refused to sell and told John that she was getting many offers all of which are over $1 million. What can John do?

Sue the seller for specific performance

A contract states that Jerry is obligated to perform, only if Susan acts in a certain manner, is what type of a contract?

A Unilateral contract requiring Jerry to perform

The statute of frauds requires

A contract for the sale of real estate must be in writing to be enforceable

After admitting property owner into a nursing home, he was diagnosed with dementia and an agent was contacted by his daughter to list his property and sell it to pay for nursing home expenses. Under what circumstances can the agent accept this listing?

A legal guardian can sign the listing agreement

An agreement where buyer agrees to buy, and seller agrees to sell is known as

A sales contract

Seller listed property and received 2 full price offers. What is the best approach?

Accept whichever offer the seller wants and possibly accept the other offer as a backup

The legal interest obtained by a buyer whose offer has been accepted is

Equitable title

Two days before a scheduled closing, a seller notified the buyer that he was not willing to close unless the buyer agreed to pay an additional $25,000, a request that was totally unacceptable to the buyer and in violation of the signed purchase agreement. The buyer sued the seller for specific performance and the court ordered the completion of the sale. What legal right did the buyer have to sue?

Equitable title

Seller accepted an offer stipulating that the property will remain on the market reserving the right to accept a possibly better offer from a second buyer after notifying the first buyer and giving her 72 hours to close on his house or lose the deal in favor of the second buyer. This type of condition is an example of

Escape clause

To establish the rights and obligations under the principal-agent relationship, an agreement has to be

Expressed

An intentional and deliberate misstatement of facts is known as

Fraud

A purchase agreement/sales contract was set to expire on October 10, at 5 PM. When the buyer did not show up to the closing, the seller waited until 5:01 PM and declared the purchase agreement null and void. This indicates that the purchase agreement

Had a "time is of the essence" clause

Seller is asking $300,000 and received an offer for $250,000 and she countered at $275,000. Three hours later and while waiting for the buyer to act, another offer came for $300,000. How should the seller handle this situation?

If the counteroffer is not yet accepted, simply revoke it and accept the second full price offer

Seller is asking $300,000 for property and received an offer for $250,000. He countered for $280,000 but before the buyer was able to sign the counteroffer, seller received a full-price $300,000 offer, so he contacted the first buyer to revoke the counteroffer before it was accepted. Which of the following is true regarding this situation?

If the first buyer has not accepted the counteroffer yet, seller has the right to revoke it and accept the second, full-price offer

Anna has been trying to sell her home for quite some time. Vincent is a real estate agent and he contacted Anna for an appointment to list the house. During the appointment, Anna expressed frustration with real estate agents and mentioned that she felt more comfortable if she didn't sign the listing agreement. Instead, she told Vincent that if he could sell the house, she will give him a 7% commission. Vincent left the meeting without getting a listing, simply relying on the seller's attractive 7% commission offer. What is true?

If the property is sold, the seller does not owe a commission

A sales contract was signed by a married couple. The house burned down to the ground two weeks before the closing, killing the husband. The purchaser declared the sales contract null and void as a result of:

Impossibility of performance

An addendum:

Is attached to a sales contract to provide additional information

A private seller meets with a buyer who offers him full price and one dollar cash EMD. The seller accepts with a handshake. Later the seller changes his mind, and the buyer wishes to sue the seller for specific performance and consults an attorney who tells him that there is nothing the court can do because the agreement he had with the seller

Is unenforceable

Which of the following best describes an accepted purchase agreement (sales contract)?

It is an executory contract

Shirley, a buyer, signed a purchase agreement that was submitted through her selling agent to the listing agent. Two days later, the seller made a counteroffer. The buyer agreed to the proposed changes but decided to send the offer back to the seller with one more small change. What is true regarding this situation?

It is now up to the seller to keep the transaction going

What happens to the EMD when the contingency stated in the sales contract has not been met?

It is paid back to the buyer

All the following is true regarding an earnest money deposit EMD except:

It is refundable if the buyer rescinds the contract

Which of the following is true regarding an option contract?

It locks the price for a period, in favor of an interested buyer

All the following applies to an executed contract except:

It remains executory for a limited period

Seller verbally promised agent John a $10,000 commission if he finds her a buyer. John procured the buyer and the seller paid him. How is the payment of the commission legally perceived?

It was up to the seller to pay or not to pay the agent

Seller listed property for $175,000 and received two full price cash offers. The seller and listing agent discussed the possibility of trying to get more money for the property. What is the best approach?

Notify both buyers of the seller's intention and give them a reasonable deadline to come up with the highest and best offer

Karen signed a purchase agreement subject to obtaining a certain loan amount. After trying two different lenders she was not able to get the necessary financing because the property did not appraise high enough to get the loan amount she needed. Sharon can terminate her purchase agreement due to

Legal contingency

A purchase agreement (sales contract) requires

Legal description of the land

A person may not contract to break the law, then call upon the law to enforce the contract. Which of the following contract essentials describe this fact?

Legal objective

A preset amount of damages that is agreed upon in advance, in case of breach of contract is called:

Liquidated damages

A seller was asking $675,000 for his house and received an offer for $600,000. He scratched the price, wrote $650,000 and initialed the change and sent the counteroffer to the buyer who scratched it and wrote $625,000, initialing the change. The seller refused to respond to the late offer and after waiting a few days the buyer gave up and notified the seller of accepting the $650,000 counteroffer but the seller insisted on getting $675,000. What legal rights does the buyer have?

Make a new offer at $675,000

Which of the following is not required to validate a contract?

Monetary consideration

John wishes to lease a house and possibly buy it as soon as he sells his house in another city. The landlady is offering a one-year lease and has indicated willingness to sell the house at a reasonable price. What is the best approach that serves John?

Negotiate a lease with option to buy

Susan is renting a house for a reasonable amount and has asked her landlady to sell her the house but the landlady's response was that the house was not for sale but if someone approached her to buy it in the future, she will make Susan aware of that offer and Susan may be able to match it. What is the best approach for Susan to guarantee that no one else buys the house from underneath her?

Negotiate a right of first refusal

All the following are true regarding an option contract except

No credit is given for the option fee unless the option is exercised by the deadline

What is the least amount of monetary consideration required by law to validate a contract?

No minimum amount is required by law

Once a counteroffer is accepted by a buyer, the buyer's agent must

Notify the listing agent

After receiving three offers on listed property, Susan was finally able to reach the seller who invited her to his office to meet. In which order should the offers be presented?

Present the offers in no specific order

John had an accepted purchase agreement with a $5000 deposit. John's employer transferred him to a different city, so he approached the seller to cancel the agreement and the seller agreed and refunded his deposit. The termination of the purchase contract is an example of

Rescission

Seller was asking $400,000 for his property and a buyer offered $350,000 cash. Seller rejected the offer but countered at $380,000 cash. The buyer sent a counteroffer agreeing to the $380,000 but made the offer subject to obtaining financing instead of the original cash offer. Before the seller's acceptance, the buyer decided that $380,000 was too much for the property and notified the seller that he had changed his mind. This action by the buyer is an example of

Revocation

Upon listing property, the seller indicated that a built-in oven and refrigerator were excluded from the sale. The fact was emphasized on the seller's disclosure statement SDS by answering:" not available" to the question regarding the working condition of the appliances. Furthermore, the fact was reiterated when the property was published on the multiple listing service MLS. A purchase agreement was written by a cooperating broker without referencing the appliances and the seller accepted the offer without making any changes. What is the status of the oven in the refrigerator?

Seller cannot remove them

Seller is asking $450,000 and received an offer for $400,000 which he did not accept or reject. The seller drafted a new contract for $435,000 and sent it to the buyer who rejected it and requested a refund of his EMD because he wanted a different property. The seller notified the buyer that he was going to sign the $400,000 original offer because he had not rejected it yet. What is the buyer's obligation in this case?

Sending the counteroffer voided the first offer and cannot bind the buyer to it

A sales contract is not binding on the parties until

Signed by the offeree

Kimberly is a real estate broker- investor who is interested in obtaining an option to buy vacant land. She was able to secure an option for $600,000 with the payment of a $10,000 option fee. Which of the following invalidates her contract with the owner?

The optionor had been diagnosed with dementia

Who is entitled to the EMD when the seller breaches the purchase agreement/sales contract?

The buyer

A buyer sent a purchase agreement to the seller for $115,000. The seller crossed out the $115,000 price and sent the offer back for $125,000 with the seller's initials placed next to the change. The purchase agreement is considered to be complete when...

The buyer initials next to the price change and notify the seller

Seller told the buyer that the property had 600 acres. After closing, it appeared that the property only had 350 acres and the buyer sued to rescind the transaction. Two days before the scheduled hearing, the buyer's attorney asked the court to withdraw the lawsuit. It appeared later that the property was worth much more than the purchase price because a mining company became interested in it. What are the consequences in this case?

The buyer, not the seller, can decide whether to enforce or rescind the transaction

A sales contract remains executory until

The closing

A buyer signed a sales contract based on bad advice received from a greedy buyer's agent who did not disclose that he was a part owner of the property being sold. Once the fact is discovered, all the following is true except:

The contract is enforceable by either party

Jack who is 32 years old signs a contract with 16-year-old Susan. What ramifications exist?

The contract is voidable by Susan or her legal guardian

Which of the following statements is true with respect to the assignment of lease?

The entire leasehold is transferred

An owner, confidentially informed his listing broker that due to circumstances, he was willing to sell the property at much below the asking price. The broker told the owner that he will try to get him the fair market value, but secretly contacted an acquaintance to buy the property, flip it, and share the profit with the broker, and the parties signed an investment agreement. The property was purchased at 30% below market value and flipped, but the broker did not receive a portion of the profit. What can the broker do?

The investment contract is void because it lacks legal objective

Seller listed property with broker Jenny, the next day Jenny died in a plane crash. What is the status of the listing?

The listing is terminated by operation of the law

How would you identify an offeror and an offeree

The offeror is the one making the offer or counteroffer and the offeree is the one receiving it

All the following are bilateral contracts except:

The option

Seller accepted a purchase agreement (sales contract) subject to a 10-day inspection/due diligence. The buyer inspected the property and agreed to accept it in its "as is" condition knowing that it had a well and a septic system. A few days before the closing the buyer discovered that the neighborhood was served with municipal water and sanitary sewers, so he contacted the seller asking him to pay the tap-in fees and connect the property, but the seller refused and stated that he preferred well water. How will this refusal affect the contract?

There is no effect

What does a purchase agreement and a land contract have in common?

They both give the buyer equitable title

Which of the following does the Purchase Agreement, the Lease, and the land contract NOT have in common?

They result in acquiring title to real estate

Bob is interested in purchasing Jerry's 10,000 sq. ft. building. Bob indicated to Jerry that the building does not seem to be that large, but Jerry assured him and placed that information in the purchase agreement. If it appears later that the building was only 8,500 sq. ft. and Jerry knowingly misled Bob about the square footage, which of the following is true?

This contract is voidable because Jerry lied on the PA

Earnest money deposit EMD is placed in the purchase agreement

To show serious intent and good faith by the buyer

Listing agent acted in a friendly manner convincing an out-of-town unrepresented buyer that the purchase price was way below the market. After signing an offer with EMD and getting it accepted by the seller, the buyer found out that the listing agent was not telling the truth. The buyer may petition the court to rescind the transaction based on

Undue influence

A private seller attempting to sell property by owner indicates to a broker that he is willing to sign an agreement to pay the broker commission if the broker procures a full price offer on his property. This agreement is classified as

Unilateral

Sam signed a contract with Mark. Under the contract, Sam promised to act, but Mark did not. Which of the following classifications applies to this contract?

Unilateral

It is customary for an agent who has an accepted hardcopy offer to go back to the buyer to have him bottom line the contract as proof that the buyer was notified of seller's acceptance and has received a signed copy, as required by state rules. What is the status of a contract that was accepted by the seller when such acceptance was communicated back to the buyer but later the buyer refuses to bottom line the contract?

Valid and binding

Megan, a minor, inherited four houses from her deceased parents and the court appointed her uncle as her legal guardian. When she was almost 18, she asked her uncle to sell one of the houses to buy a sports car, but he refused, so she went ahead and signed a listing agreement with a broker who thought that she was 18 years old. Megan reached the age of majority two months later and her uncle found out about the listing and contacted the broker to cancel it. What is the status of the listing?

Voidable

A purchase agreement signed by buyer and seller indicated that the sale of land was for the purpose of constructing a country club with an 18-hole golf course. Shortly before closing, the purchaser was informed by the zoning officials that a golf course does not comply with the master plan which reserved the area for multifamily residential dwellings. What is the status of the purchase agreement?

Voidable by the buyer

All the following are true with regards to assignments except

When an assignment takes place, the assignor is released from liability under the contract

Which of the following applies to an unenforceable contract?

Will not be enforced by a court of law

An agent was contacted by property owner to list it. Once he met with the seller, he found out that the seller was illiterate and could not read the listing agreement and can barely sign his name. Can the agent accept the listing?

Yes because an illiterate person has contractual ability as long as he fully understands the terms of the contract

A contract is set to expire on June 10, with a "time is of the essence" clause. The buyer received a "clear to close" notice from the lender on June 11, and the seller indicated that she would still be interested in closing the transaction. Can the parties legally go through with the sale?

Yes, but the parties must sign an amendment to extend the closing deadline

A buyer emailed an offer to purchase on listed property stating that the seller had three days to accept or reject. On the next day, the buyer found a better-priced property and notified the listing agent that he wished to revoke the offer. The listing agent notified the buyer that the offer was already accepted earlier that morning and it was too late to revoke it. Can the buyer revoke the offer?

Yes, in order for the offer to be binding on the parties, it had to be accepted and the buyer must have been notified before he revoked the offer

On August 1, John obtained a 90-day option to purchase commercial property for $600,000 subject to obtaining a loan of not more than 70% of the purchase price and within a 60-day period after exercising the option. On October 20, John notified the optionor of his intention to purchase the property and indicated that he will be ready to close no later than December 15, but the optionor indicated that the option will be expired by that time and increased the price to $650,000. Does John have the right to buy the property at the option price?

Yes, the option was exercised before it expired