Law of Contracts

Void Contracts

A void contract is an attempt to create a legally binding agreement; however, it does not impose any legal rights or satisfy the requirements of a legally valid contract. Typically, void contracts are unenforceable because they involve an illegal act, fraud, misrepresentation, duress, or undue influence. *A contract entered into only because one party threatened the business of another A contract that requires an individual to steal someone else's property in exchange for a promise A contract that requires an individual to embezzle money

A broker tells her license holders that if anyone brings in over a certain amount of business in six months, they will be entitled to a bonus. This is a(n): This is not an example of a contract. bilateral contract unilateral contract lateral contract

unilateral contract

What do general partners assume in a partnership? limited personal liability unlimited corporate liability unlimited personal liability risk shared with other limited partners

unlimited personal liability

An estate at will allows the tenant to occupy the property: until either the tenant or the landlord decides tenancy should end beyond the term stipulated in the lease agreement until their lease ends until the landlord renews the lease

until either the tenant or the landlord decides tenancy should end

All real estate agents MUST: use contracts promulgated by TREC create contracts and addenda specific to their clients' needs All choices are correct. offer legal advice to the best of their abilities to their clients

use contracts promulgated by TREC

Doug granted Betsy a life estate for a property he owned and named his son as the remainderman. When will his son become the owner of the property? when Betsy dies when Doug dies Life estates are not legal in Texas. never

when Betsy dies

In a leasehold estate, when does the tenant's right of possession end? the day their landlord lists their rental on the MLS when their lease has expired on closing day as soon as the current landowner accepts a buyer's offer

when their lease has expired

A concurrent estate is any type of estate: where multiple parties co-own it where a party has an encumbrance on a property where one party has full ownership rights to a property where a tenant enjoys the right to possession during their lease

where multiple parties co-own it

Timmy owns the rights to a lot in Abilene, Texas. He wants to build a laundromat, but the city of Abilene will not give him permission because of his location. What is this an example of? zoning escheat taxation eminent domain

zoning

Which of the following is the BEST example of a legally valid contract? Jenny had an agent prepare her contract. The buyer and seller of 6602 Krollton are both of sound mind and over the age of 18. Melissa gave her home away for free. Michael got his sales contract notarized by a licensed notary.

The buyer and seller of 6602 Krollton are both of sound mind and over the age of 18.

Which of the following is an example of eminent domain? The city of Abilene claims a 12 x 30 feet section of Lisa's property in order to add another lane to the highway. The city of Abilene does not permit Lisa to build a car dealership on her land. The city of Abilene demands Lisa pay $3,300 in property taxes. The city of Abilene lays claim to Lisa's property after she passes away, as she had no will or descendants.

The city of Abilene claims a 12 x 30 feet section of Lisa's property in order to add another lane to the highway.

Which of the following individuals would TREC regulate? a maintenance worker a timeshare developer a landscape architect a mortgage banker

a timeshare developer *Mortgage bankers, maintenance workers, and landscape architects are not governed by TREC. TREC regulates those who work more directly in real estate, including timeshare developers, real estate educators, and inspectors.

bilateral

a two party contract containing an exchange of promises from both parties

unilateral

a two party contract where only one party makes a promise

Jerry orally agrees to sell his apartment to his friend Newman, but then has second thoughts and decides not to. Newman is obviously upset, but according to the statute of frauds, he wouldn't be able to successfully sue Jerry to force him to sell the apartment. Why? all real estate purchase contracts MUST be in writing money was not exchanged yet the statute of frauds only covers single-family homes, not apartments Jerry and Newman knew each other before the agreement was made

all real estate purchase contracts MUST be in writing

Without permission, Betsy's neighbor built a fence that extends onto Betsy's property. What is the fence? an exchange an encroachment an easement an estate

an encroachment *A physical structure that extends onto another landowner's property is an encroachment.

Executed Contracts

an executed contract is a contract in which all terms have been fulfilled by all parties. While there are many kinds of contracts, all contracts become executed contracts once all parties have completed their contractual obligations.

Jane is selling her house and wants to sell the washer to the buyer as well. The washer is not annexed to the real estate and is considered personal property. What kind of document should Jane's license holder use to transfer ownership of the washer? contract notepad bill of sale deed

bill of sale

When a married couple purchases a home in Texas, who is required to sign the deed? both partners whoever has the nicest signature one partner whoever makes the most money

both partners

What laws dictate what types of real estate buildings can be built in a geographical area? geographical laws building and zoning laws location laws area laws

building and zoning laws

The right of one party to access or use the land of another is a(n): assessment lien encroachment easement

easement

The four main types of estate in land are freehold estate, leasehold estate, concurrent estate, and: equity estate non-freehold estate fee simple estate equitable estate

equitable estate

Michael has entered into a sales contract with the seller of 444 Ocean Avenue. What type of interest does Michael have? equitable interest concurrent interest ownership interest security interest

equitable interest

A buyer does not pay for a property in full. This is an example of a(n): tax lien assessment lien priority lien equitable lien

equitable lien

PETE stands for Police Power, Eminent Domain, Taxation, and: elimination escrow escheat estate

escheat

Mutual consent must be written down in an agreement to be valid. TRUE FALSE

false

Monica owns her house. For the duration of her lifetime, she has the right to her property (unless she sells it) and can will her property title to her children after her death. Monica has a: freehold estate life estate leasehold estate fee simple estate

fee simple estate

If no third party is named as remainderman, when a life estate owner dies, the property reverts to the: relative of the life estate owner third party heir of the life estate owner grantor

grantor

Thanks to the rule of capture, surface right owners have the right to: planes (if the planes cross over their property) oil (if they bring it up to the surface) groundwater (if they can pump it up to the surface) rivers (if the body of water touches their property)

groundwater (if they can pump it up to the surface)

To describe a contract as "executory" is to: identify its stage of existence describe its nature or purpose indicate it can be terminated define it as performance-based

identify its stage of existence

When is the mineral estate included in the sale? if an owner doesn't explicitly limit the transfer of ownership to "surface only" never always if there is documented potential for oil/gas development

if an owner doesn't explicitly limit the transfer of ownership to "surface only"

What type of agency occurs when a party assumes consent to a relationship based solely upon inferences formed by the actions, conduct, and words of either or both parties? implied agency written agency express agency dual agency

implied agency

In Texas, an estate can be held: in trust or in severalty only in severalty or in co-ownership only in trust, in severalty, or in co-ownership in co-ownership only

in trust, in severalty, or in co-ownership

What is NOT a unique characteristic of land? inherent value immobility indestructibility non-homogeneity

inherent value *Indestructibility, non-homogeneity, and immobility are all part of land's unique characteristics. Inherent value is not one of land's unique characteristics.

What is real estate? land and water improvements and water land and improvements land, water, and improvements

land and improvements

Shane bought a ceiling fan from Home Depot. It's still in the box and not attached to the ceiling. What is it considered? a cool gadget annexation real property personal property

personal property

What is a fixture? real property that's transformed into an abstract personal property that's transformed into an abstract personal property that's transformed into real property real property that's transformed into personal property

personal property that's transformed into real property

The goal of foreclosure is for: the lender to sell the house as quickly as possible the borrower to recoup their losses on the loan they defaulted on the borrower to be able to leave the house as quick as possible the lender to recoup their losses on the loan the borrower defaulted on

the lender to recoup their losses on the loan the borrower defaulted on

If a minor enters into a contract, the contract can be considered voidable by who? the contract would be null and void, not voidable the other party the contract is always voidable with contracts involving a minor the minor

the minor *Majority laws protect minors from entering into agreements that they may not have the experience or knowledge to understand. This means that if anyone under the age of 18 enters into a contract, the contract is considered voidable — at the option of the minor but NOT the other party.

Who initiates the foreclosure on an 80-10-10 loan? the seller the buyer the HOA the mortgage company

the mortgage company

Escheat

the ownership interest in a property is transferred directly to the state without their consent.

What does the "rule of capture" refer to? the right of a surface estate owner to access all rainfall that lands on their property the right of a surface estate owner to access all nearby lakefront property the right of a surface estate owner to use all water that flows by their house the right of a surface estate owner to use all groundwater that they can bring to their surface

the right of a surface estate owner to use all groundwater that they can bring to their surface

A couple renting a home have a leasehold estate, which means they have: ownership of the property the right of possession a deed for the property the right of disposition

the right of possession

The major difference between tenancy in common and joint tenancy is: who has possession of the property the number of contracts signed the number of owners the right of survivorship

the right of survivorship

If a structure was built before 1978, it is required that: the seller furnish a Lead-Based Paint Disclosure the buyer get an advanced inspection the seller furnish a Home Inspection Disclosure the buyer get a foundation-specific inspection

the seller furnish a Lead-Based Paint Disclosure

If Jenna has the water rights to a property, she has the rights to use: the groundwater the well the rainwater the stream

the stream *a river or stream.

What is the primary purpose of the Broker-Lawyer Committee? to arbitrate real estate contract disputes to promulgate transaction forms, making them voluntary or required to create and codify real estate rules for TREC to create, edit, and recommend contract forms to TREC

to create, edit, and recommend contract forms to TREC

Once created, a contract can be valid, void, voidable, or: performable unenforceable acceptable executive

unenforceable

Which law protects consumers from fraudulent schemes? Statute of Limitations Deceptive Trade Practices Act Statute of Frauds Doctrine of Laches

Deceptive Trade Practices Act

In the early days of real estate, why was it easy for a seller to cheat a buyer by selling a property multiple times? People were not as smart at this time. Deeds were not always recorded. Buyers were used to buying houses on good faith alone. Most sellers sold with bad intentions.

Deeds were not always recorded.

What rights does a leasehold estate establish? It designates a tenant as the remainderman of a property in the event the landlord dies. It establishes a tenant's legal right to use and occupy a property they own. It provides a tenant with the option of buying the property they are leasing before the end of the lease. It establishes a tenant's legal right to use and occupy a property they do not own.

It establishes a tenant's legal right to use and occupy a property they do not own.

Which of the following is an example of a private land-use control? The city of Abilene won't allow Jimmy to build a coffee shop on his property. The city of Abilene claims Jimmy's property after he passes away. Jimmy's HOA won't allow him to keep his trash can out by the curb past 8 p.m. Jimmy owes $3,500 in taxes this year.

Jimmy's HOA won't allow him to keep his trash can out by the curb past 8 p.m.

??? comes with rights of survivorship, while ?? comes with rights of inheritance.

Joint tenancy comes with rights of survivorship, while tenancy in common comes with rights of inheritance.

Which of the scenarios below BEST describes fee simple subject to condition subsequent? Katie is conveying the title of her land to Tim for life, no conditions attached. Katie is conveying the title of her land to Tim until Katie's children reach the age of 18. Katie is conveying the title of her land to Tim on the condition that no illegal drugs are consumed on the property or she can reclaim the title. The State of Texas is granting Tim the right to the title to his property for his lifetime, in spite of any third party lien on the property.

Katie is conveying the title of her land to Tim on the condition that no illegal drugs are consumed on the property or she can reclaim the title.

??? law is law derived from past judicial decisions of courts. ???? law refers to laws formally created by lawmakers, such as legislatures.

Common law is law derived from past judicial decisions of courts. Statutory law refers to laws formally created by lawmakers, such as legislatures.

Which of the following is an example of escheat? Marcela's subdivision requires her to park her vehicles inside her parking garage. Marcela is not allowed by the city of Abilene to build a guest house in her backyard. The city of Abilene is taking 132 feet of Marcela's property in order to add a roundabout. Marcela passed away without a will and no known heirs, so the city of Abilene now has the title to her estate.

Marcela passed away without a will and no known heirs, so the city of Abilene now has the title to her estate.

Larry, Moe, and Curly have a tenancy in common for a 200 acre plot of land. The ownership is divided evenly. What do they each own? 200 acres 1/3 ownership of the property 50 acres Larry owns half, Moe and Curly each own 1/4

1/3 ownership of the property

How many brokers are on the Broker-Lawyer Committee? 3 6 4 9

6

Which of the following best describes a joint venture? Texas only allows married couples to establish this proprietorship. When taking this partnership, the investor assumes unlimited personal liability. It is a type of venture only done by one proprietor. After the business goal is finished, the investors part ways instead of continuing business together.

After the business goal is finished, the investors part ways instead of continuing business together.

Which of the following is true regarding the statute of limitations? All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred. A legitimate complaint for a performance failure related to a valid contract will be considered even if the statute of limitations has expired. Statute of limitations are state-level laws only. Statute of limitations are federal-level laws only.

All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred.

What's the difference between an addendum and an amendment? An addendum needs to be signed by all affected parties, but an amendment does not. An addendum is attached to a contract to create additional terms, and an amendment changes the terms within an existing contract. All contracts require amendments, but not all contracts require addenda. TREC promulgates amendments but does not promulgate addenda.

An addendum is attached to a contract to create additional terms, and an amendment changes the terms within an existing contract.

Executory Contracts

An executory contract is a contract which has NOT been completely executed or performed. The terms are not yet fully carried out or are in the process of being carried out by one or more parties in the agreement.

Unenforceable Contracts

An unenforceable contract is one that has, or had, the potential of being a valid contract, but its enforcement is barred by some attribute of the contract or a technicality of law.

Eminent Domain

Eminent domain is the power of the state to seize a citizen's private property or seize a citizen's rights in property (with compensation), but without the consent of the owner.

An example of a TREC promulgated contract is the: Improved Property Contract Farm and Ranch Contract One to Five Residential Contract (Resale) Condominium and Co-op Contract

Farm and Ranch Contract

Michael owns the surface rights to 3333 ABC Drive. Oil Company B owns the mineral rights to 3333 ABC Drive. Which of the following statements is TRUE? Oil Company B has the right to use the surface estate as much is "reasonably necessary" to access the mineral estate without Michael's permission. Oil Company B needs to ask Michael for permission to exercise their mineral right. As the surface estate owner, Michael's rights come first. Oil Company B cannot do anything on 3333 ABC Drive, as they do not have surface rights.

Oil Company B has the right to use the surface estate as much is "reasonably necessary" to access the mineral estate without Michael's permission.

There are four basic types of public land-use controls.

P is for police power E is for eminent domain T is for taxation E is for escheat

??is the right of the state to regulate and restrict land use in order to protect the public, including enforcing zoning and building codes. ?? is the right of the state to seize a citizen's private property for public use without the owner's consent but with compensation. ?? is the right of the state to charge real estate to pay for services provided by the government. ?? is the right of the state to seize a deceased person's estate if an individual dies without a will and has no surviving spouse, lineal descendants, or other known heirs.

Police power is the right of the state to regulate and restrict land use in order to protect the public, including enforcing zoning and building codes. Eminent domain is the right of the state to seize a citizen's private property for public use without the owner's consent but with compensation. Taxation is the right of the state to charge real estate to pay for services provided by the government. Escheat is the right of the state to seize a deceased person's estate if an individual dies without a will and has no surviving spouse, lineal descendants, or other known heirs.

Police power

Police power is the state's inherent right to regulate an individual's conduct or property to protect the health, safety, welfare, and morals of the community. *Zoning Building codes Private controls on land Application of rules

Samantha has been found guilty of the unauthorized practice of law. Which of the following is the most likely example of a possible TREC penalty? Samantha's license is suspended and she is fined. Samantha is charged with a felony. Samantha receives a mild warning. Samantha receives a short prison sentence.

Samantha's license is suspended and she is fined.

Most executory contracts are created with the ultimate goal of being fully executed. TRUE FALSE

TRUE

The Texas Real Estate Commission does not write or change TRELA. TRUE FALSE

TRUE *TREC enforces the laws that the Texas State Legislature passes.

Taxation

Taxation is a charge on real estate that is used to pay for services provided by the government. Most homeowners pay taxes for the city, state, county, and hospital district in addition to many special tax districts like MUD districts or freshwater districts.

??? is the legislation that governs the licensing of Texas real estate license holders. While ???, on the other hand, enforces those provisions.

Texas Real Estate License Act is the legislation that governs the licensing of Texas real estate license holders. While TREC, on the other hand, enforces those provisions.

The ???? committee creates, edits, and recommends contact forms. ??? then has the power to approve, promulgate, or dismiss those contract forms.

The Broker-Lawyer committee creates, edits, and recommends contact forms. TREC then has the power to approve, promulgate, or dismiss those contract forms.

Describe an important distinction between unilateral and bilateral contracts. Unilateral contracts only require one signature. Bilateral contracts require two. Unilateral contracts involve only one party. Bilateral contracts require two parties. Unilateral contracts offer to pay for accomplished performance. Bilateral contracts offer to pay for the promise of performance. In unilateral contracts, only one party performs. In bilateral contracts, both parties perform.

Unilateral contracts offer to pay for accomplished performance. Bilateral contracts offer to pay for the promise of performance.

Valid Contracts

Valid contracts are legal agreements meeting all the essential, basic requirements of the law. *Mutual consent (100% agreement) Legally competent parties (adult, sane, and sober) Consideration (an exchange of something of value) Lawful objective (the purpose of the contract must be legal) Adherence to a statute of frauds if required (written and signed offer and acceptance)

Voidable Contracts

Voidable contracts are potentially valid contracts where at least one party has the option to rescind the contract. Oftentimes, voidable contracts involve a party who is incapable of legally entering into a contract, such as a minor or an adult incapacitated by mental illness or the influence of medication or alcohol.

voidable vs void

Voidable contracts require a party to disaffirm the contract before it is rendered unenforceable. Void contracts are unenforceable from the start.

A broker is helping a government agency locate a building they can buy for an office. The agency has their own form they want the agent to use when they make their offer. Can the agent do that legally? Yes, a government agency can require their own form to be used. No, they must use the promulgated form. No, it would be a violation of TRELA. No, it is a violation of the Rules of the Commission.

Yes, a government agency can require their own form to be used.

Maybeth is buying a house. Does the contract need to be in writing? No, because it concerns debts or specific duties. Yes, because it involves the sale or transfer of real estate. No, because of the statue of frauds. It is up to Maybeth whether or not the contract is oral or in writing.

Yes, because it involves the sale or transfer of real estate. *The statute of frauds requires contracts to be in writing if the situation falls under one of several categories, including the sale or transfer of real estate.

Marissa, a license holder, is assisting a seller in the sale of their condo. Does she need to use a promulgated contract? No. There are no promulgated contracts in Texas. Yes. She'll need to use the Condominium Contract. No. Marissa can write up the contract herself. Yes. She'll need to use the Residential Contract.

Yes. She'll need to use the Condominium Contract.

implied

a contract created by the actions of the parties rather than by express agreement

executed

a contract in which all terms and promises have been fulfilled

executory

a contract that has not yet been fully performed

express

a contract with explicit stated and agreed upon terms and conditions

What is a lis pendens? a contract used to formalize a lien a notice used to inform the public when a lawsuit is filed that affects a specific piece of real estate a list that prioritizes liens on a property a term used for federal judgement liens

a notice used to inform the public when a lawsuit is filed that affects a specific piece of real estate

Which of the following is an example of an executory contract with a set end date? a cable TV package subscription where the customer pays a monthly fee for access to programming an equipment lease where the user pays rent on the equipment being borrowed an automatically renewing apartment lease contract where the tenant pays rent in exchange for living quarters a rent-to-buy lease where the tenant exercises an option to buy the property

a rent-to-buy lease where the tenant exercises an option to buy the property

Community property is: only applicable to divorced couples not a legal term in the state of Texas a special form of joint tenancy that exists between a married couple owned by an individual

a special form of joint tenancy that exists between a married couple

A form that TREC requires agents to use is called a(n): approved contract unilateral contract promulgated contract committee contract

promulgated contract

Jami has a beautiful 10-year-old oak tree planted in her backyard. What is the oak tree considered to be? fixture personal property real estate annexation

real estate

A seller has a flat-screen TV. To mount the TV, the seller puts brackets on the wall. What are the brackets considered? a nuisance personal property real property personalty

real property

In a bilateral contract, what kind of obligations are created? reciprocal obligations unenforceable obligations double obligations solitary obligations

reciprocal obligations

If someone has a river on their property, what type of rights would be associated with it? aquatic riparian coastal littoral

riparian The water rights associated with ownership of land adjacent to water are referred to as riparian rights when the real estate abuts a flowing body of water, such as a river or stream.

What are land's economic characteristics? abundant, moveable, permanent, everywhere indestructibility, immobility, non-homogeneity, abundant moveable, modification, investment, permanent scarcity, situs (location), modification, fixity

scarcity, situs (location), modification, fixity

What do cooperative members own? only the common areas shares of the corporation that owns the building(s) the land their part of the building

shares of the corporation that owns the building(s)

A mortgage is an example of a: specific, involuntary lien general, involuntary lien general, voluntary lien specific, voluntary lien

specific, voluntary lien

Single-family home owners own: the lot the building and the lot on which it stands neither the building nor the lot the building

the building and the lot on which it stands

In real estate, interest is defined as a right or legal share in a property. The type of interest you have depends on: if the property is newly constructed how long you've owned the property who you purchased the property from the extent of your share in that property

the extent of your share in that property

A condo owner owns: the exterior of their unit the land on which the unit was built the common areas around the unit the interior of their unit

the interior of their unit