Unit 1: Texas Contract Law
A license holder representing a seller is asked by that seller, "What does paragraph 5 of this TREC-promulgated contract mean to me?" What is the best answer by that agent?
"I'm not an attorney, but here is what it means..."
An agent represents a buyer. Which of the following forms of advice can the agent give to an unrepresented buyer?
Advice on having the abstract examined by an attorney
According to the Texas Real Estate License Act, which of the following requires that a license holder be a practicing attorney?
Advising a person regarding the validity of title to real property
Which statement is TRUE, as it relates to the DTPA?
Errors and omissions insurance does cover fraud or intentional violations of the DTPA.
What is the make-up of the Broker-Lawyer Committee?
Six brokers, six lawyers, and one member of the general public
Who promulgates contracts for mandatory use by license holders?
Texas Real Estate Commission
Which of the following is TRUE?
The Broker-Lawyer Committee develops forms and recommends their adoption, but it is the TREC that promulgates the forms for mandatory use.
Which of the following is an exception to using a TREC-promulgated contract form?
Transactions in which a United States government agency requires a different form to be used
If an agent is preparing an offer for a buyer but has not been able to get a completed seller's disclosure from the listing agent, the buyer
can make an offer and ask the seller to provide the notice within a certain number of days.
A property sells for $25,000, and the dwelling built thereon is only valued at $1,000. What does Section 5.008 of the Texas Property Code say about this situation?
It does not require the seller to provide a written notice of the property's condition.
Which of the following concerns led to the Texas Real Estate License Act prohibiting license holders from practicing law?
License holders giving counsel regarding the validity of an instrument that addresses real property rights
Which of the following groups of real estate professionals subscribes to a code of ethics?
National Association of REALTORS®
How many commissioners are on the Texas Real Estate Commission?
9
Which of the following should a listing agent NOT do in relation to the seller's disclosure notice?
Be accessible when the seller is filling out the notice to help answer questions and aid the seller in filling it out.
What law specifically prohibits license holders from practicing law?
Texas Real Estate License Act (TRELA)
Which of the following forms is approved by TREC for a written seller's disclosure notice?
The answer is OP-H. Texas Real Estate Commission (TREC) Form OP-H, Seller's Disclosure of Property Condition, contains the language required by the Property Code.
Which of the following real estate-related entities has rule-making authority in the state of Texas?
The commission
The seller's spouse had an HIV infection. Under the Texas Property Code, what is the sellers' duty to disclose the illness?
The seller has no duty to disclose the illness.
A consumer who wishes to file a DTPA lawsuit must do so within
two years after the consumer discovered the deceptive act.
Keeping the DTPA in mind, which of the following acts are MOST applicable to real estate license holders?
The answer is all of these. Other acts most applicable to real estate include the following: making false statements of fact concerning the reasons for a price reduction, misrepresenting the authority of an agent to negotiate the final terms of a sales contract, and representing that work has been done on real or personal property when the work has not been done.
Which of the following is NOT a promulgated TREC form?
The answer is deed. The deed is not promulgated by TREC; it is a document prepared by an attorney that is executed at closing.
What does the Broker-Lawyer Committee do?
The answer is drafts contracts. The Broker-Lawyer Committee develops forms and recommends their adoption, but it is the TREC that promulgates the forms for mandatory use.
Real estate brokers who are members of the Broker-Lawyer Committee become members by being
appointed by the Texas Real Estate Commission.
Which of the following committees is responsible for drafting and revising contract forms?
Broker-Lawyer Committee
What type of contract is a license holder prohibited from completing because doing so would be considered the unauthorized practice of law?
Prepared by a licensed escrow agent
Who appoints the lawyers to the Broker-Lawyer Committee?
President of the state bar
A buyer found a contract form on the internet and wants her agent to help her fill out and adapt it for Texas law. Which of the following is TRUE regarding an agent's ability to help the buyer complete the form?
The agent is prohibited from helping her adapt and fill out the form.
A license holder is purchasing property for himself. A TREC-promulgated contract is appropriate for this purchase, but the license holder decides to be creative and draft his own contract from what he has learned in his real estate classes. Which of the following is most likely to be TRUE?
The license holder has the right to draft his own contract.
A license holder who completes a contract for the sale of real property is not engaged in the unauthorized practice of law if the license holder uses a form that is
The answer is all of these. Notwithstanding any other law, a license or certificate holder who completes a contract form for the sale, exchange, option, or lease of an interest in real property incidental to acting as a broker is not engaged in the unauthorized or illegal practice of law in this state if the form was (1) adopted by the commission for the type of transaction for which the form is used; (2) prepared by an attorney licensed in this state and approved by the attorney for the type of transaction for which the form is used; or (3) prepared by the property owner or by an attorney and required by the property owner.
What is one of the purposes of the Texas Real Estate License Act?
The answer is all of these. The purpose of the TRELA is to protect the public through regulation of licensed real estate brokerage practitioners, real estate inspectors, residential service companies, and entities offering time-share interests.
Which groups provide forms that can be used by sellers to make the required property disclosure?
The answer is any of these. All the information required by the property disclosure can be found on forms provided by the Texas Association of REALTORS®, the Texas Real Estate Commission, and individual broker firms.
As compared to any other type of civil action, in a Deceptive Trade Practices Act (DTPA) action, a plaintiff
The answer is may be awarded treble damages. Treble damages and mental anguish are available in the DTPA action. Court costs and attorney's fees may also be added.
Which of the following is legal for the license holder to draw up?
The answer is none of these. The TRELA clearly establishes that it is illegal for the license holder to draw a deed, note, deed of trust, will, or other written instrument that transfers or may transfer an interest in or title to real property. However, the act goes on to give permission for a license holder to complete a contract form that may bind the sale, exchange, option, lease, or rental of any interest in real property as long as the forms used have been prepared by or are required by the property owner or have been provided by the real estate commission, prepared by an attorney licensed by the State of Texas, and approved by that attorney for a particular type of transaction.
What is the primary difference between a lawsuit brought under the Deceptive Trade Practices Act (DTPA) and any other type of civil action?
The answer is treble damages are available under the DTPA. Treble damages and mental anguish are available in the DTPA action. Court costs and attorney's fees may also be added.
A real estate broker modifies a 1992 TREC-promulgated contract form and updates it to fit a particular transaction. Which of the following could happen?
The broker could have his license suspended or revoked for practicing law.
What effect do the rules made by the commission have on license holders?
The rules have full force and effect of law.
Which of the following is TRUE?
The rules of the Texas Real Estate Commission have the full force and effect of law.
Under the DTPA, to get triple damages, a plaintiff must prove
that the defendant made the statement intentionally.
