Contracts - Real Estate
Which of the following is the best explanation of specific performance?
A legal procedure or action brought by either the buyer or seller to enforce the terms of a sales contract Specific performance is the remedy sought when a party takes an action in court to compel a party to carry out the terms of a contract. A seller could sue a buyer requiring him to buy the property, and a buyer could sue a seller requiring him to sell the property, if either party defaults
Which of the following would NOT need to be in writing?
A month-to-month rental agreement The Statute of Frauds requires all contracts for the sale of land (earnest money agreements, exchange agreements) or any interest in land (options, mortgages, easements, ect), all listings of real property and contracts exceeding one year to perform to be in writing. If such contracts are not in writing, they are unenforceable. Contracts (leases and rental agreements) for one year or less may be oral
A private corporation wants to sell its real property. Who is entitled to sign the employment contract?
A person authorized by the board of directors A corporation has the capacity to contract according to authority given in its articles of incorporation. Contracts entered into outside of this authority may not be valid. Therefore, one must determine whether the corporation has the authority to enter into the contract and who is authorized to sign the contract on behalf of the corporation by requesting a copy of certification of resolution of the board of directors. This certificate would authorize the contract and the person signing the contract
A month-to-month tenancy must include which of the following to be valid?
All of these (oral or written agreement; consideration; offer and acceptance) Since a lease is a contract, it must have consideration, offer and acceptance, legal object and competent parties. If it's less than one year it can be oral
Which of the following is the best description of a contract?
An agreement between competent parties and based upon legal consideration that creates legally enforceable duties and obligations To have a valid contract four elements are needed. These are: 1( competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law
Waiver, in legal language, is best defined as
An unilateral act with legal consequences A waiver is a unilateral act of giving up or surrendering a right voluntarily. This has the legal consequences of preventing the right from being enforced. For example, if a buyer agrees to buy a farm contingent on favorable soil tests, and later decides to purchase even if the soil tests are negative, he has waived the contingency
A contract could be rescinded due to
Any of these (mistake; fraud; misrepresentation) To rescind a contract is to cancel, terminate or annual it and restore the parties to their original positions. Contracts may be rescinded due to mistake, fraud or misrepresentation. If this happens, each party returns money received to the party it was received from, so that all are restored to their original position
A real estate sales agreement, to be enforceable, must in all cases have
Competent parties To have a valid contract four elements are needed. These are: 1) competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law. Earnest money and witnessing are not required. The signature of a spouse is required only if the spouse is also an owner. If the property is owned in severalty, the other spouse need not sign the agreement
To have a valid contract, a series of elements are needed. They are
Competent parties promising to do or not to do certain things for legal consideration, provided the agreement is with a lawful object in mind To have a valid contract four elements are needed. These are 1) competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law. All other choices lack "competent parties"
"An agreement between competent parties based upon legal consideration creating legally enforceable duties and obligations" is a definition of
Contract To have a valid contract four elements are needed. These are: 1) competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal enforceable in a court of law. Note, this definition has the 4 required elements of a contract: agreement, competent parties, legally enforceable duties, legal consideration
An executory contract is always a
Contract that is to be performed If a contract is one in which one or both of the parties has not yet perform,d it is called executory. If the contract is one in which there is nothing left to be done by either party as it has been completely performed by both parties, it is considered to be an executed contract
Using threats to force a person to enter into a contract involuntarily is known as
Duress Duress is the use of threats to force a person to enter into a contract. It would cause the contracts to be voidable
A voidable contract is
Enforceable, but is subject to rescission by one of the parties to the contract A voidable contract is enforceable. It has all the necessary elements of a contract (legal object, offer and acceptance, competent parties and consideration). However, in arriving at the agreement, one of the parties was taken advantage of (he was a minor, or he entered into the contract because of menace, duress, undue influence, misrepresentation, fraud, ect). As a result he is given the choice of allowing the contract to stand (in which case it's enforceable) or of going to court and having the court declare it void. The only party to the contract does not have this choice, therefore, the contract is not void
When the parties to a contract have fully performed the terms, the contract may properly be described as
Executed If a contract is one in which one or both of the parties has not yet performed, it is called executory. If the contract is one in which there is nothing left to be done by either party as it has been completely performed by both parties, it is considered to be an executed contract
A contract created by actions rather than oral or written words is called a(n)
Implied contract An implied contract is an agreement inferred from the actions of the parties and is not created by words or writing. An express contract is one which results from a written oral agreement
The Statute of Frauds requires that contract for the transfer of an interest in land be
In writing to be enforceable The Statute of Frauds requires all contracts for the sale of land (earnest money agreements, exchange agreements) or any interest in land (options, mortgages, easements, ect), all listings of real property and contracts exceeding one year to perform to be in writing and signed by the person to be held to the contract. If such contracts are not in writing, they are unenforceable
To be legally enforceable, an option or contract for the sale of real property must be all of the following EXCEPT
Initiated by a real estate broker or attorney All contracts must have consideration and real estate contracts must also be written and signed. There is no requirements for a broker or attorney to be involved. Note, the general rule for written contracts is that all parties must sign (and questions should be answered that way). However, there are exceptions in practice
If a seller accepted an offer but changed the date of possession, and initiated that change
It would become a counteroffer, subject to acceptance by the buyer The change is a counteroffer and becomes binding only if acceptance by the buyer. If the buyer does not like the change he need not accept it and can get his deposit back
The absence of which of the following would render an earnest money agreement unenforceable?
Legal purpose An earnest money agreement must contain the elements necessary for a real estate contract - legal object, competent parties, offer and acceptance, consideration and writing. There is no requirement for a legal description, an earnest money deposit or time period for acceptance. The deposit is used only to show good faith on the part of the buyer. Without a time period for acceptance, the offer will be valid for a reasonable time, as determined by the courts if necessary
Consideration in a contract
May be an exchanging of promises Consideration is essential to a contract. It may be an exchange of promises, a promise for an act, money, ect
A lease for less than one year
May be oral Leases for one year or less may be oral. Leases for over one year in duration must be in writing
Which of the following is NOT essential to a valid contract?
Monetary consideration To have a valid contract four elements are needed. These are: 1) competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law
A contract must have certain specific elements in order for it to be valid. Which of the following is NOT a necessary component to form a valid contract?
Notarization To have a valid contract four elements are needed. There are: 1) component parties; 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer); 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law. No contract must be notarized, acknowledged or recorded to be valid
Two men entered into a real estate contract. After one year has elapsed, they decided to change the contract, and a new contract was executed to replace the original. This is an example of
Novation To have a valid contract four elements are needed. These are: 1) component parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law. No contract must be notarized, acknowledged or recorded to be valid
To each enforceable sales agreement, there must be a(n)
Offer and acceptance All real estate contracts must be in writing and contains an offer and acceptance, or mutual consent. Earnest money is not required (it is just a good idea). Contracts do not have to be acknowledged or recorded
When the "time is of the essence" clause is inserted in a contract to purchase real estate
Punctual performance of the terms is required of the principals to the contract Time is of the essence means that both parties agree to perform by any dates specified in the agreement. If one party is ready to perform by a specified date and the other is not, the party ready to perform can declare a default of the contract. It does not require either party to perform before the specified date. This clause is found in the purchase and sale agreement (earnest money agreement). Note, choice "both the buyer and the seller are prohibited..." is false as the buyer and seller could agree to extend the time limits set
The phase "time is of the essence" is most likely to be found in a
Purchase and sale agreement Time is of the essence means that both parties agree to perform by any dates specified in the agreement. If one party is ready to perform by a specified date and the other is not, the party ready to perform can declare a default of the contract. It does not require either party to perform before the specified date. This clause is found in the purchase and sale agreement
All of the following are essential elements to a lawfully enforceable contract EXCEPT
Recordation To have a valid contract four elements are needed. These are: 1) competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law. No contract must be notarized, acknowledged or recorded to be valid
If, upon receipt of an offer to purchase under certain terms, the seller makes a counteroffer, the prospective purchaser is
Relieved of his original offer When the seller makes a counteroffer, that relieves the buyer of his original offer. The buyer is no longer bound by that offer. He may accept the counteroffer, reject the counteroffer or make a counteroffer to the counteroffer
Smith enters into a binding contract to buy lot 3 in subdivision "x" from Brown. Before closing, Brown receives a higher offer for the lot and refuses to convey it, offering Smith instead an adjacent similar lot. As a result
Smith can sue for specific performance under the contract and force Brown to convey lot 3 To take advantage of the higher value, Smith would sue for specific performance
An oral lease for two years is not enforceable due to the
Statute of Frauds The Statute of Frauds requires all contract for the sale of land (earnest money agreements, exchange agreements) or any interest in land (options, mortgages, easements, ect), all listing of real property and contracts exceeding one year to perform to be in writing. If such contracts are not in writing, they are unenforceable
Certain contracts are required to be in writing because of the
Statute of Frauds The Statute of Frauds specifies the type of documents and contracts which must be written in order to be legally enforceable
What is the meaning of novation?
Substitution of a new contract between same or different parties Novation is the substitution of a new obligation for an old one, or substitution of new parties to an existing obligation. For example, if a buyer assumes the seller's loan and the lender agrees to release the seller from liability for the loan, and the lender agrees to release the seller from liability for the loan, this results in a substitution of new parties to an existing obligation and would be a novation
Blake, a broker, negotiates the sale of a parcel of real estate for Young, a minor. When Young becomes of age he disaffirms the contract of sale and sues Blake to recover the commission paid to Blake. Which of the following statements is correct?
The contract is voidable at Young's option A contract can be voided by a minor within a reasonable period after reaching the age of majority
It is said that a valid contract must have legality of object. Which of the following best describes legality of objects?
The contract must not be for an illegal purpose or against public policy To have a valid contract four elements are needed. These are: 1) competent parties, 2) agreement to do or not to do certain things (this is mutual consent; the offer and acceptance of the offer), 3) legal consideration (promises, something of value, an act, giving up the right to act, ect) 4) legal object (the parties are agreeing to do something which is legal and not against public policy), so that the agreement is legally enforceable in a court of law
Which of the following would NOT release an offer?
The illiteracy of the seller An offer is terminated when it is not accepted in its entirety (by rejection or by counteroffer), when it is withdrawn (revoked) prior to notification of acceptance, or when it expires prior to acceptance. Illiteracy does not release an offer
Assuming that there are no other hindrances to closing, if the seller dies before signing the closing papers, the transaction is
Valid Contracts for property or money are valid and binding on heirs. Therefore, if either party died after the earnest money agreement has become a binding contract, the heirs must complete the transaction
Two parties signed a contract which both knew was for an illegal purpose. Under these circumstances, the contract would be
Void If a contract calls for an illegal act to be performed, it cannot be enforced in court. Therefore, it is void
Coercion and duress were applied upon Albert in a contract with Roger. The contract is
Voidable at the option of Albert If in arriving at an agreement, a person is taken advantage of (through duress, menace, undue influence, ect), the contract is voidable by the person. As a result he is given the choice of allowing the contract to stand (in which case it's enforceable) or of going to court and having the court declare it void. The other party to the contract does not have this choice, therefore, the contracts is not void