section 8 unit 2: Elements of a Valid Contract

Requires mutual agreement of terms

offer and acceptance

Which of the following elements is always required for a real estate contract to be valid? a. attorney review b. consideration c. earnest money d. profit

b. consideration

What does legal purpose mean? a. To be legal, contracts must involve a lawyer. b. Only contracts that state a purpose are legal. c. Contracts must be written for a lawful objective. d. As long as a contract has a purpose section and that purpose has been completed, the contract is legal.

c. Contracts must be written for a lawful objective.

If a party to a contract lacks legal capacity but enters into a contract anyway, which party may void the contract? a. both parties b. the broker c. The party lacking legal capacity d. the party possessing legal capacity

c. The party lacking legal capacity If the party doesn't have legal capacity and enters into a contract anyway, the contract is voidable by the party lacking legal capacity. So an adult can't hold a minor to a contract; however, the minor can hold the adult to the contract.

Must be entered voluntarily, without duress or undue influence

consent

Something of value, even a promise to do or not do something

consideration

What is a legally competent party? a. A party at which there are no illegal substances b. A party who knows how the legal system works c. A party who has a lot of experience in drawing up contracts d. A party who has the legal and mental capacity to enter into a contract

d. A party who has the legal and mental capacity to enter into a contract A legally competent party is one who has the legal and mental capacity to enter into a contract.

What's consideration with regard to a contract? a. Each party receives a copy of the contract for his or her records. b. One party carefully considers if he or she will accept the other party's offer. c. A buyer decides to rescind an offer. d. Something of value is given in exchange for something of value.

d. Something of value is given in exchange for something of value. Consideration is the giving of something of value in exchange for something of value.

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? a. No, because Sarah can't legally enter into a contract. b. No, she can purchase the house if Robert doesn't object, but can't do so if he objects. c. Yes, as long as she gets a legally competent party to co-sign the contract with her. d. Yes, Sarah can require that Robert fulfill the contract terms.

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

In the eyes of the law, why do people under age 18 lack contractual ability? a. Because they have insufficient resources. b. Because they lack intelligence. c. because they are immature d. because they're minors

d. because they're minors

Required for contract validity only when the nature of the contract is real property

it must be in writing

Must be for a lawful reason

legal purpose

In a real estate transaction, which of the following is established when the parties enter into an agreement voluntarily with full understanding of the contract terms? a. consent b. consideration c. legal competency d. legal purpose

a. consent

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. a. consideration b. flaw c. legal competency d. undue influence

a. consideration

Carl and Sadie, who are neighbors, got into a disagreement about early-morning noise on the weekends. The two came to an agreement: Carl promised to not mow the lawn before 10 a.m., and Sadie promised to put bark collars on her dogs in the early morning hours. Their promises represent the ______ in their agreement. a. consideration b. flow c. legal competency d. undue influence

a. consideration

legally competent parties The minor who enters into a contract with an adult to purchase real estate may hold the adult to the contract, but the adult can't legally hold the minor to the contract. a. true b. false

a. true

legally competent parties If a party doesn't have legal capacity and enters into a contract anyway, the contract is voidable by the party lacking the capacity. a. true b. false

a. true

legally competent parties A minor who enters into a contract to purchase real estate has contractual ability. a. true b. false

b. false

When offer and acceptance has occurred, both parties enter into ______. a. a contingency b. mutual agreement c. consideration d. understanding

b. mutual agreement

The residents of Blair Avenue are a close-knit bunch. They're all young couples with small children, and they don't want this dynamic to change when two of the couples have to move. Those couples sign an agreement promising not to sell to anyone without kids or to anyone over the age of 50. The contract can't be enforced because it's missing ______. a. consideration b. legal competent parties c. legal purpose d. offer and acceptance

c. legal purpose

A contract for an illegal purpose is ______. a. fraud b. valid c. void d. voidable

c. void

Age of majority and mental soundness

legally competent parties

A contract for an illegal purpose is ______.

void

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. a lawful objective b. a mutual agreement c. a purpose d. two parties

a. a lawful objective

In a real estate transaction, which three of the following are examples of consideration? a. The seller's promise to sell the property to the buyer b. The seller's commitment to transfer the property to the new owner c. The buyer's decision to take out a loan d. The property itself

a. The seller's promise to sell the property to the buyer b. The seller's commitment to transfer the property to the new owner d. The property itself Consider yourself an expert on all things regarding consideration! As you correctly identified, the buyer's decision to take out a loan is the only item that's not an example of consideration.

Which of these statements describes the essential element of offer and acceptance? There are two correct answers. a. Two parties enter into an agreement with full understanding of contract terms. b. Jim makes an offer on a property with specific terms. Angel accepts it without reading through the terms. c. A real estate broker offers to represent a client in a sales transaction. They discuss the terms of the agreement and the client accepts. d. A buyer makes an offer to a seller, and the seller makes a counter offer.

a. Two parties enter into an agreement with full understanding of contract terms. c. A real estate broker offers to represent a client in a sales transaction. They discuss the terms of the agreement and the client accepts. Offer and acceptance, also known as mutual agreement or acceptance, occurs when parties enter into the agreement with full understanding of the contract terms. By signing the contract, the parties are indicating they understand and agree to the terms.

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? a. Harvey b. jolene c. nobody d. only a judge

b. jolene

In contract law, a "legally competent" party is a party who has the ______ to enter into a contract. a. financial resources b. legal and mental capacity c. Legal background d. motivation and means

b. legal and mental capacity

What are the five essential elements of a valid real estate contract? a. notarized b. offer and acceptance c. consideration d. Legally competent parties e. legal purpose f. consent

b. offer and acceptance c. consideration d. legally competent parties e. legal purpose f. consent

A real estate contract written for an illegal purpose is ______. a. permissible and valid b. void c. Voidable only by the buyer d. voidable only by the seller

b. void

What's the best definition of legal purpose? a. attorney consideration b. Mentally capable of entering into a contract c. Written for a lawful objective d. Written for an illegal purpose

c. Written for a lawful objective

Jessica enters into a contract to acquire real property in return for some form of consideration. On the contract, Jessica is regarded as the ______. a. agent b. broker c. buyer d. seller

c. buyer