Chapter 7 exam item bank

A husband signed a contract to sell community real estate without his wife's signature. The contract is: a. voidable. b. binding. c. unenforceable. d. void.

c. unenforceable. (Both owners of community property need to be involved in the sale of property held by both parties.)

The following persons may not lawfully enter into a valid contract to purchase property, except: a. unemancipated minors. b. minors who are wards of the court. c. convicts. d. international buyers.

d. international buyers. (Foreign buyers may lawfully enter into a valid contract to purchase property.)

Writing "For Deposit Only" on the back of a check creates a(n): a. qualified endorsement. ("Qualified" suggests the endorser meant to set limits on the b. blank endorsement. c. restrictive endorsement. d. open endorsement.

a. qualified endorsement. ("Qualified" suggests the endorser meant to set limits on the check, such as "for deposit only." No other use was permitted.)

Which of the following is true? a. An illegal contract can be an enforceable contract. b. A valid contract can be an unenforceable contract. c. A void contract can be enforced by one party only. d. "Voidable" means "void unless validated."

b. A valid contract can be an unenforceable contract. (An oral contract for more than a year may be valid but unenforceable.)

When damages resulting from a breach of the contract are not adequate, each of the following may request specific performance, except the: a. purchaser. b. broker. c. attorneyinfact for one of the principals. d. seller of a parcel of land.

b. broker. (The parties to an escrow do not include the broker. Thus, the damages described do not include the broker's fee nor would the broker have any authority to demand specific performance.)

Any intentional concealment of material facts by an agent is regarded as: a. misrepresentation. b. fraud. c. collusion. d. commingling.

b. fraud. (Intentional concealment is the key to the question. This is the condition required to evidence fraud beyond mere misrepresentation.)

The right of possession and equitable title is held by the: a. vendee. b. vendor. c. trustee. d. trustor.

a. vendee. (In most cases, the party name ending in "or" owns the real estate. In the instance of a land contract, the "ee" (vendee) is the buyer and therefore has possession and equitable title of a property, but not legal title.)

When Jack sells his home, he wants to be relieved of the primary liability for payment of the existing loan. He needs to find a buyer who is willing to: a. take the property subject to the existing loan. b. assume the existing loan. c. execute a land contract. d. make a large down payment.

b. assume the existing loan. (The buyer's assumption of the loan is the only answer selection offered that will relieve the seller of the primary responsibility for the underlying debt. Though the obvious answer would be for the seller to pay off the loan, that answer selection is not provided and therefore cannot be selected.)

The instrument most likely to state that "time is of the essence" is a(n): a. exclusive authorization and right to sell. b. real estate purchase contract. c. open listing. d. option.

b. real estate purchase contract. (The purchase agreement is the only contract offered that would require a response from the opposing party within a stated period of time. This is a good example of a question in which the wrong answers may be eliminated, thus leaving only the correct one remaining.)

An offer is terminated by: a. rejection by the offeror. b. rejection by the offeree. c. revocation by the offeree. d. a request for an extension by the offeree.

b. rejection by the offeree. (This requires knowing who is who in the question. The offeror is the person who made the offer. The offeree is the person who may accept or reject an offer.)

Which of the following contracts needs to be in writing in accordance with the Statute of Frauds? a. A lease for one year. b. The sale of growing crops. c. A contract that is not to be performed for thirteen months. d. A contract that is to be performed within one year

c. A contract that is not to be performed for thirteen months. (The Statute of Frauds, based on an old English statute, requires written contracts for actions not to be performed within one year.)

Which of the following is true concerning an option? a. No consideration is necessary to create an option. b. An option is void if the consideration is inadequate. c. An option is valid so long as consideration is actually delivered. d. None of the above.

c. An option is valid so long as consideration is actually delivered. (The amount of consideration is not relevant. However, the consideration itself needs to be delivered to create a valid and enforceable option.)

To be enforceable, the listing of a business opportunity: a. needs to be in writing. b. never has to be in writing. c. does not always have to be in writing. d. needs to be exclusive.

c. does not always have to be in writing. (Be wary of "never" and "always" in questions such as this. In this case, a business opportunity sale may include real estate which requires the listing to be in writing. Recognize that an open listing is not exclusive and yet is still valid and enforceable.)

Upon the default of a buyer under a land sales contract, the seller: a. instructs the trustee to initiate foreclosure. b. requests a deficiency judgment against the buyer through the courts. c. files a quiet title action. d. files a lis pendens action.

c. files a quiet title action. (In the instance of a land contract, also known as a contract sale, there is no trustee. Further, the vendor already has them (the seller) rather than the vendee (the buyer). Thus, on a default by the buyer, the seller files a quiet title action.)

A buyer and seller initial the liquidated damages clause in a real estate purchase agreement. The buyer later defaults. The amount recoverable is: a. given to the seller when escrow opens. b. limited to 3% of the selling price. c. given to the seller after the default. d. used to pay any costs incurred by the seller and then returned to the buyer

c. given to the seller after the default. (The amount recoverable under a liquidated damages provision in a purchase agreement is not always limited to 3%, only for onetofour unit residential property. The only answer that is true is C.)

A real estate transaction in which the buyer gains possession of a property while the seller retains legal title until the debt is fully repaid is an example of a(n): a. mortgage. b. trust deed. c. land sales contract. d. sublease.

c. land sales contract. (Neither trust deeds nor mortgages transfer possession without concurrently transferring legal title.)

An offer to perform in accordance with contractual obligations is an example of: a. a conditional offer. b. a covenant. c. tender. d. performance.

c. tender. (To make an offer is to "tender" the offer. Refer to the Real Estate Glossary if any of these terms are unknown.)

Which of the following contracts must be in writing in order to be enforceable? a. An agreement by a buyer to assume an existing loan secured by a deed of trust. b. An agreement which is not to be performed within one year of being entered into. c. A listing to lease real property for one year. d. Both a. and b.

d. Both a. and b. (This is very similar to Question 1. A slight derivation on another question will likely exist on the state exam.)

Broker Matthews took a 90day exclusive agency listing to sell a property owned by Tyler. After 30 days without selling the property, Tyler sent Broker Matthews a letter cancelling the listing. One week later, Tyler enters into open listings with several other brokers. Two weeks later, one of the brokers sold the property. In this situation, Tyler: a. did not have the right to give open listings to the other brokers. b. had a right to relist the property and had the right to cancel Matthew's listing. c. owes the commission only to the broker who procured a buyer. d. is liable for payment of a commission to Matthews as well as to the selling broker.

d. is liable for payment of a commission to Matthews as well as to the selling broker. (The open listing guaranteed payment to the procuring broker. The exclusive listing is a bilateral contract which cannot be voided unilaterally. Therefore, the seller owes a commission to both brokers.)

All of the following are essential elements of a contract, except: a. an offer. b. acceptance. c. consideration. d. performance.

d. performance. (Performance is not essential to form a valid contract. Performance may be required to complete the activity called for in a contract after it has been signed (offer and acceptance), but is not necessary to the formation of a contract.)

A real estate buyer can rescind an offer until: a. the seller has agreed to an appointment. b. the offer has been presented to the seller. c. the seller has accepted the offer. d. the seller's acceptance has been communicated to the buyer.

d. the seller's acceptance has been communicated to the buyer. (As shown in Question 43, it is the communication of the acceptance of the offer to the buyer that limits their ability to rescind the offer.)

Under a land sales contract for the sale of real property, legal title is held by the: a. trustor. b. beneficiary c. vendee. d. vendor.

d. vendor. (This is the reverse version of Question 18. Again, the vendor (seller) holds legal title to the property until the debt is repaid in full.)