Chapter 3 - 1

A person that has the legal authority to act for another is: a. A listing broker. b. An attorney-at-law. c. An attorney-in-fact. d. An ostensible agent.

c. An attorney-in-fact.

Bill, the buyer, signs an offer to purchase agreement and gives broker Joan, a $1,000 earnest money deposit. The next day, before Joan has a chance to present the offer to the seller, Bill finds he needs his $1,000. What should he do? a. Ask the broker to return his money b. Nothing because he is bound to go through with the offer c. Withdraw his offer and ask Joan for his money d. Give Joan $500 for letting him out of the contract

c. Withdraw his offer and ask Joan for his money

If there is a breach of a contract for the sale of real property, an option available to the non-defaulting party is: a. rescission. b. reversion. c. suit for specific performance or actual damages. d. suit for punitive damages.

c. suit for specific performance or actual damages.

Which of the following real estate documents must be in writing in order to be enforced by the courts? a. Option. b. Real estate sales contract. c. Lease for more than one year. d. All of these choices.

d. All of these choices.

Betty has made an offer to purchase Sally's house. The contract would automatically terminate if Sally passed away: a. Before accepting the offer. b. After accepting the offer. c. Either before or after accepting the offer. d. Neither before nor after accepting the offer.

a. Before accepting the offer.

The statute of frauds does NOT require a written contract for: a. Ingress or egress. b. Purchase and sale of real property. c. Legal estates or equitable interests. d. Contract for deed.

a. Ingress or egress.

A salesperson comments to a prospective buyer, "In my opinion, this is the greatest house in town." The salesperson is guilty of: a. Puffing b. Misrepresentation. c. Fraud. d. Usury.

a. Puffing

A real estate broker presents an offer to the seller on a property with the provision that the seller has 6 days to accept the offer. At the end of the 3rd day, the buyer withdraws the offer. What should the broker do? a. Return the earnest money deposit to the buyer b. Give the earnest money deposit to the seller c. Split the deposit with the buyer d. Split the deposit with the seller

a. Return the earnest money deposit to the buyer

Which of the following is essential for a contract for the sale of real property to be upheld by a court? a. Written form b. Earnest money deposit c. Removal of all liens and encumbrances d. All of the above

a. Written form

A seller and buyer enter into a written agreement. Such action creates: a. A contract. b. An agency relationship. c. An assignment. d. An estoppel.

a. A contract.

Which of the following is true of a contract under novation? a. A new contract replaces the old one. b. The old contract is void. c. The original parties to the contract remain jointly and severally liable with the new parties. d. A new party is assigned the rights of an old party.

a. A new contract replaces the old one.

A homeowner tells a broker that he would like to sell his house. The broker agrees to sell the house. This agreement would be considered: a. An express contract. b. An implied contract. c. An illegal contract as it requires a writing. d. An equilateral contract.

a. An express contract.

The Parol Evidence Rule controls which of the following: a. An oral agreement leading to a written contract. b. A dispute between cooperating brokers. c. A settlement which occurs while a licensee is imprisoned. d. None of the above.

a. An oral agreement leading to a written contract.

A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. It was obvious that the owner had filled in and painted over the crack although the owner advised the sales agent that the seepage problem had been corrected, when in fact it had not. If the salesperson shows the property without advising potential buyers of the seepage problem, the salesperson would be guilty of: a. Fraud. b. Misrepresentation. c. Puffery. d. Nothing.

a. Fraud.

Barry makes an offer to purchase a home being sold by Pam. Pam does not accept Barry's offer, but makes a counteroffer. Relative to the counteroffer, which of the following statements is INCORRECT? a. If Barry does not accept the counteroffer, Pam has the choice to then accept Barry's original offer. b. Barry is now considered to be the offeree. c. The counteroffer rejects Barry's offer completely. d. Pam may withdraw the counteroffer at any time, prior to acceptance by Barry.

a. If Barry does not accept the counteroffer, Pam has the choice to then accept Barry's original offer.

When a seller makes a counteroffer, which of the following statements is NOT true? a. It is a partial acceptance of the original offer. b. The original offeror becomes the offeree in the counteroffer. c. It is a rejection of an earlier offer. d. It may be withdrawn at any time prior to acceptance.

a. It is a partial acceptance of the original offer.

An offer is made to a seller and the seller makes a counteroffer. Prior to the buyer accepting the counteroffer, the seller receives a better offer from another prospective buyer. Under these circumstances, the seller: a. May withdraw the counteroffer. b. Should advise the second offeror to wait. c. Can accept the second offer without recourse. d. Is bound by the terms of the counteroffer.

a. May withdraw the counteroffer.

Which of the following is not required for a contract for the sale of real property to be valid and enforceable? a. Performance b. Offer and acceptance c. Consideration d. In writing

a. Performance

An attorney-in-fact is someone who has received a _________ from someone else. a. Power of Attorney. b. Power of Substitution. c. Lis Pendens. d. Proxy.

a. Power of Attorney.

Licensee Lenny shows a home to Prospect Paul. Licensee Lenny tells Prospect Paul that this house has the best view of the lake. Prospect Paul buys the house and later discovers that a neighbor down the street has a view that in Paul's opinion is a better view than his own. This is an example of: a. Puffing. b. Mistake. c. Misrepresentation. d. Fraud.

a. Puffing.

An owner lists a property with a broker. The broker shows the property and receives an offer, but is unable to present the offer to the owner. Two days later, the owner cancels the listing agreement. What should be done with the earnest money deposit received with the offer to purchase agreement? a. Returned to the buyer b. Given to the seller c. Split between the broker and the seller d. Split between the broker and the buyer

a. Returned to the buyer

Court action taken to require the parties to a contract to carry out the terms and conditions of a contract is known as a suit for: a. Specific performance. b. Quiet title. c. Quiet enjoyment. d. Punitive damages.

a. Specific performance.

A buyer makes an offer to purchase a home for $95,000. The seller makes a counteroffer of $100,000. Which of the following statements is true? a. The seller is now the offeror. b. If the buyer rejects the counteroffer the seller has the choice to accept the original offer. c. The original offer remains open until its expiration date. d. The seller must formally reject the original offer before making the counteroffer.

a. The seller is now the offeror.

A person that has the contractual ability to enter into a contract is considered: a. To be mentally competent. b. To have given his or her consent. c. To have agreed to the terms of the contract. d. To be an adult.

a. To be mentally competent.

A novation is the substitution of a new legal obligation for an old one. a. True b. False

a. True

A state law that sets a time frame within which someone must bring a lawsuit is called statute of limitations. a. True b. False

a. True

Courts will not enforce contracts that require one to do something that is illegal. a. True b. False

a. True

In many states, the Statute of Frauds applies to listing agreements. a. True b. False

a. True

Oral leases for a period of a year or less do not fall within the Statute of Frauds that requires many contracts to be in writing. a. True b. False

a. True

If a buyer submits an offer to buy and the offer contains a contingency clause, the resulting contract is: a. Valid if the contingency is accepted by the seller. b. Invalid. c. Only valid if accepted by the seller within 24 hours. d. Illegal.

a. Valid if the contingency is accepted by the seller.

Which of the following statements, made by a broker, would NOT be considered puffery? a. "This is the most beautiful house in the world." b. "You can double your money on this property in less that 2 years, I guarantee it." c. "This is the best deal we've had in years." d. "The property is close to everything."

b. "You can double your money on this property in less that 2 years, I guarantee it."

A legal procedure or action initiated by either buyer or seller to enforce the terms of a sales contract is known as: a. An option. b. A suit for specific performance. c. A suit for quiet title. d. A statute of frauds.

b. A suit for specific performance.

Mark gives Suzanne the authority to sign for him in a real estate transaction. Suzanne is considered, in the eyes of the law, to be: a. A broker b. An attorney-in-fact c. An attorney-in-trust d. An attorney-at-law

b. An attorney-in-fact

To be valid, a contract for sale must contain all of the following EXCEPT: a. Signatures of all parties. b. An earnest money deposit. c. Consideration. d. An offer and an acceptance.

b. An earnest money deposit.

To transfer the rights contained in a note, mortgage, or lease from one party to another, by a written instrument is referred to as a(n): a. Easement. b. Assignment. c. Sublet. d. Deed of trust.

b. Assignment.

If the seller makes a counteroffer, when may that counteroffer be withdrawn? a. At any time before settlement. b. At any time prior to acceptance. c. Within 72 hours. d. Within 24 hours.

b. At any time prior to acceptance.

Under common law, acceptance of a unilateral contract takes place: a. When a written contract is signed by both parties. b. At the completion of the requested act. c. When the offeree communicates a promise to do the requested act. d. When the offeror states a promise.

b. At the completion of the requested act.

Mr. Badguy owns a house which he rents to Mr. Chump. Mr. Badguy tells Mr. Chump that at the end of the 2 year lease Mr. Chump will have the right to purchase the property for a specified price. One year into the lease, Mr. Chump pays to replace the roof and is complimented by Mr. Badguy. At the expiration of the lease Mr. Badguy refuses to sell the house to Mr. Chump. What legal doctrine might require Mr. Badguy to sell the house at the specified price? a. Mens rea. b. Estoppel. c. Statute of Frauds. d. Statute of Limitations.

b. Estoppel.

"Time is of the essence" means a reasonable time within which a contract (or portion of a contract) must be performed. a. True b. False

b. False

A listing contract signed by both the seller and broker, in which the seller promises to pay and the broker promises to do things such as advertise and show the property, is a unilateral contract. a. True b. False

b. False

A real estate sales contract does not survive the death of one of the parties. a. True b. False

b. False

An open listing contract in which the seller agrees to pay a commission to the first broker who produces a ready, willing, and able buyer is a bilateral contract. a. True b. False

b. False

It is necessary to prove that money damages were suffered in order to rescind a contract. a. True b. False

b. False

When someone assigns his contract to buy real estate to a third party, he, the assignor, is no longer liable for the performance of the contract. a. True b. False

b. False

Under which of the following conditions would a buyer most likely sue for specific performance? a. If the seller did not inform the buyer that the property being purchased is a servient estate (easement placed upon it). b. If the seller defaulted on the contract before closing. c. If the broker lied about the location of the schools. d. If the salesperson misquoted the size of the lot.

b. If the seller defaulted on the contract before closing.

A contract may be any of the following EXCEPT: a. Void. b. Involuntary. c. Valid. d. Voidable.

b. Involuntary.

A buyer and seller entered into a valid contract. The buyer, for personal reasons, asked to be released from the contract. The buyer located someone else to buy the property. The seller entered into a new contract with the other person and released the first buyer from any obligation. This would be an example of: a. Assignment. b. Novation. c. Implied consent agreement. d. Redemption.

b. Novation.

An attorney who wants to know if a particular contract needs to be in writing would look at a state's: a. Statute of Limitations. b. Statute of Frauds. c. Statute of Contracts. d. Statute of Torts.

b. Statute of Frauds.

A buyer and seller have a legal real estate contract. The contract does NOT address the issue of death by either party. If the seller dies, prior to closing, which of the following is true? a. The contract becomes null and void. b. The contract remains valid and enforceable. c. The sellers estate may cancel the contract. d. The contract is void by operation of law.

b. The contract remains valid and enforceable.

A buyer makes an offer to purchase a piece of property. The seller changes the date of occupancy by one day and signs the contract. If the purchaser does not agree with this change, which of the following is true? a. The buyer only has 72 hours to accept a change of this type. b. The purchaser has no further liability. c. The seller and purchaser could both sue for specific performance. d. The seller may keep the deposit as liquidated damages.

b. The purchaser has no further liability.

A unilateral contract is executed: a. When the offeror signs the contract. b. Upon completion of the requested act. c. When the offeree signs the contract. d. After a reasonable period of time.

b. Upon completion of the requested act.

A 17-year old inherits property from his grandfather and immediately enters into a contract to sell the property. Can he later refuse to sell the property? a. Yes, because contracts with minors are void. b. Yes, because contracts with minors are voidable. c. Yes, because the contract is unenforceable. d. No, the contract is valid and binding on all parties.

b. Yes, because contracts with minors are voidable.

An offer contains a contingency clause calling for a property inspection and approval by the buyer's wife within one week of the offer's acceptance. Is this a binding contingency? a. Yes, but only if the buyer's wife has signed the offer. b. Yes, if the seller accepts the offer. c. No, because only the buyer has made this offer. d. No, because the law does not allow one spouse to make an offer on real property in the absence of the other.

b. Yes, if the seller accepts the offer.

The loan contingency clause in a valid sales contract will contain all of the following except: a. the amount of the loan. b. the name of the lender. c. the date of the commitment. d. the interest rate of the loan.

b. the name of the lender.

A purchase contract has been agreed to by the buyer and seller of a home. The contract calls for closing to occur in 45 days. Later, the closing is actually scheduled for the 47th day. The contract could be rescinded if the contract included which of the following phrases? a. "Exact times required." b. No special wording is required. c. "Time is of the essence." d. "Time limits are specific."

c. "Time is of the essence."

What is the difference between a novation of a contract and an assignment of a contract: a. The party that initiates the action. b. A novation is legal while an assignment is not. c. A novation replaces the old contract with a new one while an assignment replaces one party to the contract with another. d. An assignment replaces the old contract with a new one while a novation replaces one party to the contract with another.

c. A novation replaces the old contract with a new one while an assignment replaces one party to the contract with another.

Which of the following is an example of a unilateral contract? a. A sales contract for a piece of property. b. An appraisal. c. A promise of a reward for the return of a lost dog. d. A marriage.

c. A promise of a reward for the return of a lost dog.

To be legally binding, a real estate contract MUST contain: a. A termite clause. b. A list of personal property. c. A property description. d. A commission.

c. A property description.

Which of the following best describes a contract? a. An offer and acceptance between competent parties to do a specific legal act. b. A written agreement between competent parties to abstain from doing a specific act. c. An offer and acceptance between competent parties to do or not to do a specific legal act for consideration d. A mutual agreement between two or more parties.

c. An offer and acceptance between competent parties to do or not to do a specific legal act for consideration

When may a counteroffer be withdrawn? a. Within twenty-four hours after acceptance. b. Within thirty-six hours after acceptance. c. At any time before acceptance. d. At any time before closing.

c. At any time before acceptance.

Which of the following is required for a contract to be valid? a. In writing. b. An earnest money deposit. c. Consideration. d. Signature and seal of a notary public.

c. Consideration.

During the period of time after a real estate contract is ratified, but before title actually passes to the buyer, the status of the contract is: a. Voidable. b. Executed. c. Executory. d. Implied.

c. Executory.

Which of the following would cause a contract to be void? a. Fraud. b. Undue influence. c. Illegal purpose. d. Duress.

c. Illegal purpose.

When a contract is entered into based strictly on the actions of the parties involved, it would be considered to be which type of contract? a. Unilateral. b. Executed. c. Implied. d. Expressed.

c. Implied.

Which of the following contracts is voidable? a. One of the parties to the contract is legally insane. b. One of the parties did not sign the contract. c. One of the parties was drunk at the time the contract was signed. d. The subject of the contract was for an illegal purpose.

c. One of the parties was drunk at the time the contract was signed.

Which of the following does NOT have to exist for a valid contract to be enforceable in the sale of real estate? a. The contract must be in writing. b. An offer and acceptance. c. Performance. d. Consideration.

c. Performance.

In the event of a breach of contract, the injured party may: a. Sue for damages only. b. Sue for specific performance only. c. Sue for either damages or specific performance. d. Sue for both damages and specific performance.

c. Sue for either damages or specific performance.

Sam, an adult, contracted to buy a vacant lot from Jerry. Several months later Sam found out that Jerry was only 17 years old. Which of the following is true regarding the sales contract? a. The contract is valid and binding on both parties. b. The contract is voidable by either party. c. The contract is voidable by Jerry only. d. The contract is void.

c. The contract is voidable by Jerry only.

A purchaser submits an offer to a seller with the condition that the property is to be financed by a conventional loan at no more than 10% interest. If the seller agrees but such financing cannot be obtained, which of the following is true? a. The purchaser loses his deposit but is relieved of further liability. b. The seller is obligated to return the deposit plus interest. c. The purchaser may request his deposit be returned. d. The seller can sue for specific performance.

c. The purchaser may request his deposit be returned.

Clara offered Bernie $60,000 for his home. Bernie changed the amount of the offer to $62,000, initialed the change, and signed the offer. With respect to the offer, which of the following is true? a. The offer becomes a binding contract, since Bernie signed it. b. The offer has been rejected and the property may only be sold if the buyer makes another offer. c. The seller changed the price and initiated the change creating a counteroffer, which the buyer may accept or reject. d. None of these choices.

c. The seller changed the price and initiated the change creating a counteroffer, which the buyer may accept or reject.

A broker has entered into a signed listing agreement. Which of the following reasons would make the agreement voidable? a. The agreement specifies that no other broker may show the property. b. The seller, being illiterate, signed the agreement with an "X". c. The seller was under the influence of alcohol when the contract was signed. d. The contract specified a 10% commission to be paid.

c. The seller was under the influence of alcohol when the contract was signed.

Which of the following is subject to the Statute of Frauds? a. Six-month lease for an apartment b. Tenancy at will c. Two-year lease for real property d. Month to month rental

c. Two-year lease for real property

A contract to hire someone to commit an illegal act would be... a. Voidable. b. Subject to rescission. c. Void. d. Valid as to the employer, voidable by the person hired.

c. Void.

A contract of sale CANNOT exist without an offer and: a. Assignment. b. Mortgage. c. Assessment. d. Acceptance.

d. Acceptance.

Lloyd Christmas owns a house which he has decided to rent to Harry Dunne. No written contract exists and there has been no discussion as to lawn care. Harry takes it upon himself to mow the lawn each week. Lloyd appreciates that and so reduces the bill for the rent by $50. This goes on for several months. As to the discount for the lawn care, what type of contract exists? a. An express, unilateral contract. b. An express, bilateral contract. c. An implied, unilateral contract. d. An implied, bilateral contract.

d. An implied, bilateral contract.

Which of the following would cause what appears to be a valid contract to be declared void or invalid? a. Misrepresentation by one of the parties. b. Undue influence or duress. c. A mistake in fact. d. Any of the above.

d. Any of the above.

Vernon presents an offer to a seller with the provision that it must be accepted within 72 hours. Under which of the following circumstances would the offer terminate? a. Seller accepts the offer, but Vernon dies before receiving a copy of the accepted offer. b. The seller resubmits the offer with a minor change as to settlement date. c. The seller wants to wait a week before acceptance. d. Any of these choices would terminate the offer

d. Any of these choices would terminate the offer

An offer is accepted by all parties with a settlement date of September 5. Three days prior to settlement the purchaser notifies the seller that funds are not available and settlement cannot take place as scheduled. Which of the following options are available to the seller? a. Sue for specific performance. b. Sue for monetary damages. c. Allow rescission of the contract. d. Any of these choices.

d. Any of these choices.

Bill has a contract in place to purchase Sam's house. Bill later changes his mind and defaults on the contract. Sam would have which of the following remedies? a. Rescind the contract. b. Sue for damages. c. Sue for specific performance. d. Any of these choices.

d. Any of these choices.

How can a contractual relationship be created? a. Written documents. b. Action of the parties. c. Words of the parties. d. Any of these choices.

d. Any of these choices.

Which of the following could be recognized as consideration in a valid contract? a. A mortgage note with interest. b. A promise to install a cabinet. c. A note without interest. d. Any of these choices.

d. Any of these choices.

A valid contract is one which: a. Serves a lawful purpose. b. Is enforceable against one of the parties. c. Has been signed by both parties. d. Contains all of the essential elements of a contract.

d. Contains all of the essential elements of a contract.

To be legally binding on all parties, a contract for sale of real estate MUST have: a. The signature of the wife, if the seller is married. b. An earnest money deposit. c. A seal. d. Legally competent parties.

d. Legally competent parties.

Mark is 16 years old and has inherited $50,000 from his grandfather. Mark contracts with Harold, an adult, to purchase his video game center. One year later, Mark decides he wants to cancel the contract. Which of the following statements is true? a. The contract between Mark and Harold is illegal. b. If Harold learns that Mark is a minor, he (Harold) may declare the contract void. c. Mark can sell the property. d. Mark may declare the contract with Harold void and get his money back.

d. Mark may declare the contract with Harold void and get his money back.

A contract may be all of the following EXCEPT: a. Exclusive authorization or right to sell. b. Lease. c. Contract of sale. d. Prospectus.

d. Prospectus.

John, an adult, entered into a contract with Paul, who is 16 years old. When John learned that Paul was a minor he decided to terminate the contract. Which of the following statements is true? a. Contracts with minors are automatically void. b. Contracts with minors are voidable at the option of the adult. c. The contract is valid and binding on both parties. d. The contract is valid and binding only on John.

d. The contract is valid and binding only on John.

After an offer to purchase has been made and accepted, the salesperson may alter the contract under which of the following circumstances? a. If there was a minor detail omitted. b. If the closing date changes. c. If the salesperson's broker approves the change. d. With the approval of all parties involved in the contract.

d. With the approval of all parties involved in the contract.

A written agreement wherein one person agrees to purchase and another person agrees to sell real property is called a/an: a. agency agreement. b. assessment. c. fiduciary obligation. d. contract.

d. contract.

One party to a contract has the right to change his mind and not perform as agreed. This right a. can be a condition of the contract itself. b. can be created by statute. c. may require payment of monetary damages. d. could be any of the above.

d. could be any of the above.