Section 6, Unit 1: Let's Talk Contracts UNIT EXAM

Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to, and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?

Arbitration

Bill and Mindy, who are neighbors, get into a disagreement about late-night noise. The two come to an agreement: Bill promises to stop having loud parties and Mindy promises to keep her dogs inside after 10 p.m. Their promises represent the ______ in their agreement.

Consideration

Which of the following elements is always required for a real estate contract to be valid?

Consideration

Jolene signs a contract to buy Harvey's home. Before closing, it's discovered that Jolene is only 16 years old. Because she's a minor, she's not considered legally competent to enter into a contract. Which of the parties can void the contract?

Jolene

Doris and Kathleen, who are neighbors, enter into an agreement to not permit their real estate agents to sell their homes to families with children. This agreement lacks ______, so it's void.

A lawful objective

If a party to a contract lacks legal capacity but enters into a contract anyway, which party may void the contract?

The party lacking legal capacity

Starla, 35, and Gwen, 32, are going into business! Gwen is buying a share of Starla's franchise. Their attorneys drew up a contract that had Gwen providing $45,000 to Starla in return for 50% ownership. Gwen and Starla happily signed the contract, Gwen paid Starla the $45,000, and Starla presented Gwen with a notarized certificate showing Gwen's 50% ownership in the company. What type of contract is this?

Valid

Jessica enters into a contract to acquire real property in return for some form of consideration. On the contract, Jessica is regarded as the ______.

Buyer

Morgan has agreed to sell his home to Dierks, and they've signed a contract. Which of these actions changes the contract from executory to executed?

Dierks' lender funded the loan, and closing took place.

The Graysons just closed on their new home. They move in tomorrow. What type of contract do the Graysons have?

Executed

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?

Executory

Hannah wasn't able to get the financing to open her boutique, so her mother became a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?

Indemnification

Which clause in a contract states that one or more parties won't be held liable if there are losses or expenses related to the contract?

Indemnification clause

A valid contract must include which of the following elements?

Legally competent parties

A legally competent party means that an individual has the capacity, legally and ______, to enter into a contract.

Mentally

Jerry and Simon signed a contract giving Jerry the option to purchase all of Simon's restaurant equipment for a set 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?

Statute of limitations

In a contract, consideration is the giving of ______.

Something of value in exchange for something of value

In the eyes of the law, why do people under age 18 lack contractual ability?

They're minors.

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

As part of the sales contract, Garth, the seller, was supposed to provide a copy of the seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is this?

Voidable

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 his 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?

Voidable

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

Robert and Sarah enter into a contract for Sarah to purchase Robert's home. Robert decides he doesn't want to sell, and is elated when he finds out that Sarah's only 17 years old. Can Sarah force Robert to sell?

Yes, Sarah can require that Robert fulfill the contract terms.