Chapter 3

A contract is said to be bilateral if

The answer is all parties to the contract exchange binding promises. Bilateral means that each of the parties agrees to give something (i.e., buyer and seller, seller and listing broker, landlord and tenant).

When the parties agree to terms and show their intentions in words, whether orally or written, the agreement is said to be

The answer is an express contract. In an express contract, the parties state the terms and show their intentions in words—oral or written. Most real estate contracts are express contracts; they have been committed to writing. Under the statute of frauds, certain types of contracts must be in writing to be enforceable in a court of law.

A contract must meet certain minimum requirements to be considered legally valid. All of the following are essential elements of a valid contract EXCEPT

The answer is earnest money. The essential elements of a valid contract are offer and acceptance, consideration, legally competent parties, mutual agreement, and legal purpose. Earnest money is not required for a valid contract.

A contract that complies with all the basic requirements may still be voidable. To be valid, the contract must have

The answer is mutual agreement. A contract must be entered into by mutual agreement. It means that there must be a "meeting of the minds"; that is, there must be complete agreement between the parties about the purpose and terms of the contract.

Which of the following is an example of a unilateral contract?

The answer is open listing agreement. An open listing agreement is an offer by the property owner to compensate the first agent that produces a buyer; the agent makes no promises.

A contract to perform an unlawful act is considered which of the following?

The answer is void. A contract must be for a legal act. No one may enter into a legal contract for an illegal purpose.

The essential elements of a contract include all of the following EXCEPT

The answer is earnest money. To be legally valid, a contract does not require earnest money. Consideration can be the mutual exchange of promises.

Once a sales contract is completed with all parties fulfilling their promises, the ownership changing hands, and the seller receiving the sales price amount, the sales contract is

The answer is an executed contract. At closing, after the seller has conveyed the property to the buyer and the seller has received the sales price amount, the contract is considered an executed contract.

A person approaches an owner and says, "I'd like to buy your house." The owner says, "sure," and they agree on a price. What type of contract is this?

The answer is unenforceable. An oral contract may be valid if all parties continue to agree, but it is not able to be enforced. The statute of frauds requires that real estate contracts be in writing.

When a seller proposes a deviation from the terms of an offer, the seller is considered to be

The answer is making a counteroffer. The rejection of an offer with a proposal of a deviation from the terms of the offer is called a counteroffer.

When a contract lacks one of the essential elements of a legal contract it is

The answer is void. A contract that is lacking in one or more of the essential elements is void and has no legal force or effect. A contract that is void was never a legal contract.

When a contract contains all of the essential elements that make it legally sufficient or enforceable and is binding in a court of law, it is

The answer is valid. A valid contract meets all of the required essential elements (i.e., offer and acceptance, consideration, legal purpose, consent, and legal capacity).