Lesson 6: Contract Law: Pop Quiz
X and Y execute a properly drawn up option agreement for X to purchase Y's commercial property. X gives $5 in consideration. The option is: A.unenforceable B.valid C.void D.voidable
B.valid An option agreement, because it is a contract, must include consideration. The consideration can be a nominal amount (like $5), but it must actually be given to the optionor and can't be merely a recitation of consideration.
A buyer and seller have signed a contract, but the sale is not completed and the deed hasn't been delivered. Until the title is transferred to the buyer at closing, the contract is: A.void B.unenforceable C.executory D.executed
C.executory The contract is executory, which means it is in the process of being performed. (Executed means the contract has been performed.)
To be enforceable, a contract for the sale of real estate must be in writing and signed by the parties. This is true because of which law? A.Real Estate License Law B.Uniform Commercial Code C.Real Estate Settlement Procedures Act D.Statute of Frauds
D.Statute of Frauds The statute of frauds requires certain contracts, including virtually all real estate contracts, to be in writing.
The listing agreement states that a property is 5.1 acres. The purchase and sale agreement states that it's 5.12 acres. The mortgage notes that the property is 5.22 acres, while the deed states that the lot's size is 5.21 acres. If there is a dispute, which of the documents will take precedence? A.Deed B.Listing agreement C.Mortgage D.Purchase and sale agreement
A.Deed Various documents make up an agreement to transfer property from a seller to a buyer (the mortgage and listing agreements are not really part of that transfer, however). Two rules apply here. First, when the documents making up a contract conflict, the one signed last usually controls. Also, deeds tend to control over purchase and sale agreements.
When can a minor enter into a binding contract? A.If a guardian co-signs B.If the contract is witnessed C.If the minor is at least 16 years of age D.Never
A.If a guardian co-signs Affairs of minors or incompetent persons can be handled by parents or by court-appointed guardians. The authorized person can enter into a contract on behalf of the minor. The age of majority in Washington, and almost all other states, is 18 years.
Which of the following would NOT make a contract voidable? A.It is missing an essential element B.One party signed the contract as a result of fraud C.The contract resulted from misrepresentation D.One of the parties was subject to duress
A.It is missing an essential element If one of the four contract essential elements (capacity, mutual consent, lawful objective, and consideration) is totally missing, the contract is void, not just voidable.
Margo agreed to buy Peter's house. At closing, Peter changed his mind. He hasn't signed the deed and no longer wants to sell his house. Can Margo take legal action to force the sale? A.Yes, Margo can file a suit for specific performance B.Yes, Margo can file a suit for possession C.No, Peter hasn't signed the deed so Margo has no legal rights D.No, Peter hasn't signed the deed so Margo cannot enforce the contract
A.Yes, Margo can file a suit for specific performance The legal premise that no two properties are alike is the basis for a suit for specific performance, which asks the court to order someone who has breached to actually perform the contract as agreed (deliver the deed to the buyer), rather than simply pay money damages.
A and B sign a rental agreement in which A agrees to lease her property to B in exchange for rent. This contract is: A.bilateral B.implied C.unilateral D.voidable
A.bilateral Bilateral contracts are formed when each party promises to do something, and both parties are legally obligated to perform. Lease agreements are bilateral contracts.
A provision in a sales contract that states that a sum agreed to in advance will serve as full compensation in the event of a breach is a: A.liquidated damages provision B.compensatory damages provision C.punitive damages provision D.default damages provision
A.liquidated damages provision Most purchase and sale agreements call for forfeiture of the earnest money if the buyer breaches the contract. This is an example of a liquidated damages provision. Under this type of provision, the seller isn't allowed to sue the buyer for additional damages, even if the earnest money deposit isn't sufficient to cover the seller's actual losses.
W, age 17, enters into an installment contract to purchase a five-year-old car from S, an adult. From a legal point of view, the contract is: A.void B.voidable by W only C.voidable by S only D.voidable by either S or W
B.voidable by W only The contract is voidable by the minor, but not by the other party.
An option: A.transfers title immediately when it is signed by both parties B.transfers legal title (but not equitable title) when it is signed by both parties C.sets a time limit to keep an offer open D.does not include the basic terms of the contract (such as the sale price); those are to be determined later
C.sets a time limit to keep an offer open An option basically keeps an offer open for a set period of time.
If a contract is breached and then the statute of limitations runs out, the contract is: A.void B.rescinded C.unenforceable D.valid
C.unenforceable A contract that has been breached cannot be enforced by a court if the statute of limitations has expired. This makes the contract unenforceable.
A 17-year-old purchased a house. He moved in, lived in it for a year, and then decided he didn't want the responsibility of owning a home. He refused to honor the contract. In this case the contract: A.is valid; the buyer must abide by its terms B.is voidable; the buyer can choose whether or not to carry out its terms C.was voidable when signed; however, the buyer probably ratified it by living in the house D.is void; it was missing an essential contract element
C.was voidable when signed; however, the buyer probably ratified it by living in the house Generally, a contract entered into by a minor is voidable, which means it can be rescinded by the minor. However, if the minor does not act promptly, the contract may be deemed to have been ratified.
A homeowner with a mortgage sells his home to a purchaser who agrees to assume the mortgage. The purchaser applies for and obtains the lender's approval, and the seller is released from liability for the mortgage. This is an example of: A.assignment B.subrogation C.subordination D.novation
D.novation This is a novation, because the lender has approved the purchaser and released the seller from liability. The purchaser has entered into a new loan agreement with the lender that replaces the original agreement between the seller and the lender.
A contract gives a person the right to purchase property for a particular price within a certain timeframe. This contract is a/an: A.land contract B.lien agreement C.sale-leaseback D.option
D.option An option is an agreement that gives one party the right to buy or lease property at a set price within a set period of time.
Loren has been looking for a home for several months. He finally found one he liked, just by driving around and looking at "For Sale by Owner" signs. He immediately made a full-price offer of $325,000. He made an earnest money deposit of $3,000. The seller quickly accepted the offer. The purchase and sale agreement is: A.invalid, because Loren didn't use a real estate agent to close the deal B.invalid, because the home wasn't part of the local multiple listing service inventory C.valid, because Loren made an earnest money deposit as part of his offer D.valid, because Loren's consideration for the contract was the $325,000 purchase price
D.valid, because Loren's consideration for the contract was the $325,000 purchase price The purchase price is the consideration for the contract (not the earnest money deposit).
An offer is dated June 4. The offer is accepted on June 7. The buyers are approved for a loan and satisfy the financing contingency on June 9. The transaction closes on June 28. The date of the contract is: A.June 4 B.June 7 C.June 9 D.June 28
B.June 7 The date on which acceptance occurs is considered to be the date of the contract. In this case, that would be June 7.
A minor purchases a home right before he turns 18. Immediately after he reaches the age of majority, he contacts the seller and rescinds the contract, demanding his money back. Which is true? A.This is possible if the home was purchased with a mortgage, because of the right of rescission under Regulation Z B.This is possible because he is doing so within a reasonable amount of time after having reached the age of majority C.This isn't possible because buyers are subject to caveat emptor D.This isn't possible because a buyer can't rescind a voidable contract after closing
B.This is possible because he is doing so within a reasonable amount of time after having reached the age of majority A person can typically rescind a contract he entered into as a minor, as long as he acts fairly quickly. The key detail is what age the buyer was when he agreed to the deal, not the age when he tried to rescind. Here the buyer appears to have acted reasonably promptly.
In order to create a valid contract, the offeree must: A.accept the offer within five days B.accept the offer without making any changes to it C.immediately accept the offer (the offeree has no more than 12 hours to consider acceptance) D.not accept the offer without consulting with his own agent (or other representative)
B.accept the offer without making any changes to it If the offeree makes a "qualified acceptance"--that is, an acceptance with changes--this is really a counteroffer, not an acceptance.
Juanita offers $5 to whoever will rake the leaves in her yard. This is a/an: A.license B.unilateral contract C.implied contract D.bilateral contract
B.unilateral contract A unilateral contract is one where only one of the contracting parties is legally obligated to perform.
A buyer and seller agree upon an option to purchase, with a 60-day option period. When should the parties agree upon the purchase price? A.Any point between the signing of the option agreement and closing B.At closing C.Before signing the option agreement D.When the buyer decides to exercise the option
C.Before signing the option agreement An option agreement should contain all of the details that a purchase and sale agreement would contain. Once the option agreement is exercised, the option agreement serves as the sale contract.
A contract to purchase property must include which essential element? A.Equal bargaining power between the parties B.A seal by a notary public C.Mutual agreement D.A three-day right to rescind
C.Mutual agreement An unambiguous offer and an unqualified acceptance are essential to a valid contract of any kind. This is also called mutual agreement (also known as mutual consent).
A buyer failed to sign her offer to purchase a property. Her offer is: A.valid B.voidable C.void D.enforceable
C.void When an offer has not been signed, it's void and cannot be accepted by the seller.
An option to buy property has been exercised. At that point, it becomes a/an: A.bifurcated contract B.unilateral contract C.executed biennial contract D.executory bilateral contract
D.executory bilateral contract Once the optionee agrees to complete the purchase (exercises the option to buy), the agreement becomes bilateral and both parties are obligated to perform.
Which of the following does NOT terminate an offer? A.An offer from a third party for a higher purchase price B.A qualified acceptance (counteroffer) by the offeree C.The offeror dies before the offeree accepts the offer D.The offeror revokes the offer before it is accepted
A.An offer from a third party for a higher purchase price An offer can be terminated through revocation by the offeror, death of the offeror, or a counteroffer. It is not terminated by a competing offer from another party.
In an executed contract: A.both parties have performed their duties B.only one party has made a promise C.at least one promise has been completed D.one party may sue for specific performance
A.both parties have performed their duties An executed contract is one that has been fully performed. In other words, both parties have performed their duties and done what they promised to do.
John negotiated an option contract with Margaret, in which Margaret had three months to purchase John's property. In the second month, Margaret found another buyer. Margaret can probably transfer her right to purchase the property to another buyer because of the right of: A.novation B. Assignment C.first refusal D.rescission
B. Assignment Margaret may assign the option contract to another buyer (unless there is a clause in the contract prohibiting assignment).
Which of the following people might bring a suit for specific performance? A.A buyer in a real estate transaction in which the seller backed out one day before closing B.A homeowner unhappy about a neighbor who painted her house purple in violation of the subdivision CC&Rs C.A real estate broker who didn't receive the commission she was promised D.A seller who was overcharged during escrow
A.A buyer in a real estate transaction in which the seller backed out one day before closing Courts generally grant specific performance only when the object of a sales contract is unique and monetary damages would not be sufficient to put the nonbreaching party in the position she would have been in if the contract had been performed. That's the situation for a real estate buyer, as well as for purchasers of items such as jewelry or artwork.
When is an enforceable purchase and sale agreement formed? A.When the buyer knows of the seller's written acceptance of the offer B.When the seller has orally informed the buyer of her acceptance C.When the seller has received the earnest money D.When the transaction has closed
A.When the buyer knows of the seller's written acceptance of the offer Formation of a contract occurs when the offeree communicates acceptance to the offeror in an acceptable method and within the proper time period. For a real estate contract to be enforceable, the agreement must be in writing.
The optionee in an option to purchase real estate: A.has no obligation to purchase the property B.is the prospective seller of the property C.must purchase the property, but may do so at any time within the option period D.is limited to a refund of the option consideration as a matter of right if the option is exercised
A.has no obligation to purchase the property The optionee (buyer) has no obligation to purchase the property that is the subject of the option contract. However, the optionor (seller) is entitled to keep the consideration in exchange for granting the option.
Which of the following is true regarding an oral agreement for the sale of real property? It is: A.unenforceable; it violates the statute of frauds B.void; it violates the statute of frauds C.voidable; it violates the statute of frauds D.valid; assuming both parties are above the age of majority
A.unenforceable; it violates the statute of frauds An oral agreement for the sale of real property fails to fulfill the requirements of the statute of frauds. Such a contract is unenforceable.
Jim is a local handyman. Yolanda, a homeowner, hires him to build a chicken coop in her back yard. They agree on a set price for the job. However, once Jim begins working, he realizes it's going to take him a lot longer than he thought, and he realizes he's being underpaid. Jim: A.will be liable for breach of contract if he doesn't finish the chicken coop, regardless of whether it takes longer than he expected B.can sue Yolanda for violation of the Fair Labor Standards Act C.can make Yolanda renegotiate the terms of the contract, simply by refusing to proceed unless she does so D.made an honest mistake, so Yolanda is legally obligated to pay him more for the work
A.will be liable for breach of contract if he doesn't finish the chicken coop, regardless of whether it takes longer than he expected The agreement was valid, and Jim is obligated to fulfill his part of the bargain, even if the work wasn't quite what he expected.
Barker is declared incompetent by a court, and his daughter, Marge, is appointed to handle his affairs. After several years, Marge asks her sister Beth to take over her duties. Beth then lists Barker's property for sale. Would a sale of Barker's property be valid under these circumstances? A.No, any contract concerning real estate and an incompetent person is automatically void B.No, Beth hasn't been designated by a court to handle Barker's affairs C.Yes, but only if Beth gets Barker's written permission D.Yes, Marge has delegated her responsibilities properly
B.No, Beth hasn't been designated by a court to handle Barker's affairs An incompetent person's property may be sold, but the deed must be signed by a court-appointed guardian or a duly appointed attorney in fact. Beth doesn't meet either of these criteria.
A buyer and seller sign a contract for deed. Two weeks later, the buyer is declared mentally incompetent. The buyer's guardian contacts the seller and says that he can continue to make the buyer's payments as agreed. Which of the following is true? A.The buyer can disaffirm the contract within a reasonable period of time B.The buyer can finish out the contract as the buyer's guardian has proposed C.The seller can agree to receive payments from the guardian and if the payments become unreliable, the seller can then cancel the contract D.The contract is automatically voided because of the buyer's incapacity, regardless of what the guardian says
B.The buyer can finish out the contract as the buyer's guardian has proposed If a person is declared incompetent after signing a contract, the contract may be voidable at the discretion of a court-appointed guardian. As with any voidable contract, though, the person's guardian may decide to ratify the agreement and continue with it. (If the buyer has an appointed guardian, the buyer would not be the one who decides to disaffirm the contract.)
Sally made an offer and gave the seller three days to accept. The next day, she found another property she liked better. Sally called the agent and revoked her offer. Sally must: A.make sure the seller has been notified of the revocation before making an offer on the second property B.do nothing; she notified the agent of her decision to rescind the offer C.give the seller three days to accept or reject, as stated in her original offer D.None of the above
B.do nothing; she notified the agent of her decision to rescind the offer An offer may be revoked at any time before it has been accepted.
Marci, a home owner, hired Charles to do ongoing general maintenance on her property. They entered into a one-year contract. Six months later, Charles got married and his wife wanted to move to another state. Charles knew someone else--Marian--who provided excellent home maintenance services. Everyone agreed that Marian would take over for Charles. Marci and Marian entered into a new contract, and Marci's contract with Charles was canceled. This arrangement is a/an: A.assignment B.novation C.breach D.tender of performance
B.novation When one party is substituted for another, a novation has taken place.
William took a listing and soon discovered that his client had been declared incompetent by a judge six months ago. Under these circumstances, the listing contract is: A.enforceable if William finds a buyer B.of no value to William because it's void C.renegotiable, but only for 24 hours D.binding, as William was acting in good faith
B.of no value to William because it's void Any contract signed by a person who has been declared incompetent is void as a matter of law.
An optionee's rights can be assigned under all of the following circumstances, except when the: A.option money is $10 or less B.option money is in the form of a promissory note C.optionor has died D.optionee has died
B.option money is in the form of a promissory note If the option money is in the form of a promissory note (in other words, the option hasn't been paid for yet), the optionee cannot assign it.
A legal action brought in court to compel a party to fulfill the terms of a contract because the land is unique and money damages would not adequately compensate the party victimized by a breach is called a/an: A.partition action B.suit for specific performance C.quiet title action D.injunction
B.suit for specific performance The legal premise that no two properties are alike is the basis for a suit for specific performance, which asks the court to order someone who has breached to actually perform the contract as agreed (deliver the deed to the buyer), rather than simply pay money damages.
The purchaser signs an offer and gives it to the real estate agent to pass on to the seller, along with an earnest money deposit. At this point: A.the earnest money will be held by the agent until the buyer defaults after closing B.the offer can be withdrawn any time before it is accepted C.in the eyes of the law, the parties have formed a valid contract D.specific performance would be the remedy if the seller refused the offer
B.the offer can be withdrawn any time before it is accepted An offeror can revoke an offer at any time until he is notified that the offer has been accepted. Many contracts also include a deadline for acceptance.
Chris, a real estate agent, met with Zach, a property owner, to discuss listing the property. Zach told Chris that he was illiterate and that he needed Chris to read the listing agreement to him. Chris did so, plus he spent a long time explaining the various terms and answering Zach's questions. Zach agreed to everything, and signed the agreement with an "X." The listing agreement is: A.valid, as long as Zach gets his attorney to verify what Chris told him B.valid, because Zach fully understood the terms of the contract (he was illiterate, not incompetent) C.invalid, because an illiterate person is not mentally competent D.invalid, because Chris was guilty of the unauthorized practice of law when he discussed the terms of the listing agreement with Zach
B.valid, because Zach fully understood the terms of the contract (he was illiterate, not incompetent) As long as an illiterate person understands the terms of the contract, he can give his consent to it.
There are written contingencies in a purchase and sale agreement. This contract is potentially: A.unilateral B.voidable C.executed D.contrary to public policy
B.voidable Contracts with contingencies are valid, but they may be voidable if the contingency is not fulfilled.
Joe and Clarissa enter into a purchase and sale agreement. While they were negotiating the price, Joe claimed that a basement could be built despite the property's rocky soil. He was wrong. This contract is: A.voidable by Joe because he was wrong about the soil B.voidable by Clarissa because Joe misrepresented the soil's condition C.voidable by neither D.void
B.voidable by Clarissa because Joe misrepresented the soil's condition The contract is voidable by the buyer. Whether the misinformation was deliberate (actual fraud) or an innocent misrepresentation (constructive fraud), the buyer is not getting what she bargained for. She can rescind the contract if she wants, or she can complete the sale anyway.
A buyer has signed a purchase and sale agreement for an estimated 48 acres of land. When the property is surveyed, it turns out to be only 37 acres. A contract that results from a misrepresentation like this is: A.voidable by either party B.voidable by the aggrieved (injured) party C.a valid contract D.void
B.voidable by the aggrieved (injured) party The contract is voidable by the buyer. Whether the misinformation was deliberate (actual fraud) or an innocent misrepresentation (constructive fraud), the buyer is not getting what she bargained for. She can rescind the contract if she wants, or she can complete the sale anyway.
Mark tells Elizabeth that a new freeway will be built near the vacant land he is selling, even though he knows the freeway is now being built along a different route. Elizabeth relies on Mark's representation and signs a purchase and sale agreement, agreeing to pay a premium price for the land. Shortly before closing, Elizabeth finds out about the freeway plans. Which of the following is true? A.Elizabeth must complete her part of the contract; she can't claim fraud B.The contract is voidable by Mark C.Elizabeth can force Mark to fulfill his part of the contract, even though there was fraud D.the contract is void; there was an intentional misrepresentation
C.Elizabeth can force Mark to fulfill his part of the contract, even though there was fraud Fraud makes the contract voidable by the injured party. However, the injured party may also choose to go through with the contract, and the person who committed the fraud (in this case, Mark) will be bound by the contract. (Here, Elizabeth might decide that the property is still a good enough deal that it will pay off in the long run.)
A potential buyer gives a seller an offer that doesn't meet the seller's demands in the listing. What has the buyer given? A.Contract of sale B.Counteroffer C.Offer to purchase D.Option
C.Offer to purchase An offer simply must express a willingness to contract, and be certain in its terms. It does not need to match the seller's terms.
You might hear the terms "offer and acceptance," "mutual assent," and "meeting of the minds" in connection with a contract. What do they all have in common? A.They affect only contracts for the transfer of personal property B.They mean there is a qualified acceptance of an offer C.They mean there is an unqualified acceptance of an offer D.They refer to whether the parties have capacity to enter into a contract
C.They mean there is an unqualified acceptance of an offer These terms all refer to whether the parties mutually consented to the terms of a contract. To be valid, it must be an unqualified acceptance. (A counteroffer is sometimes referred to as a qualified acceptance.)
The Taylors sign an exclusive right to sell listing that expires in six months. A short time later they change their minds and decide not to sell. Can they terminate the listing? A.No, they must wait for the listing to expire in six months B.No, an exclusive right to sell listing is binding on both parties C.Yes, if the parties mutually consent D.Yes, either side may freely rescind a listing agreement without penalty
C.Yes, if the parties mutually consent Both parties to a contract can mutually agree to rescind a contract before it is scheduled to expire.
The parties negotiate the sale of a property by writing letters to each other (in the old-fashioned way, by hand). Their agreement is: A.invalid; the parties must meet with each other in person B.invalid; the parties must use a preprinted form C.invalid; each letter is only a counteroffer to the previous letter D.valid; under the statute of frauds, contracts to sell real estate are enforceable if they are in writing
C.invalid; each letter is only a counteroffer to the previous letter The statute of frauds requires contracts for the sale of real estate to be in writing. Simple notes, memoranda, or a series of letters can be sufficient to meet the requirement, as long as they identify the property adequately, indicate agreement between the parties, and are signed by the parties.
Frank gives Stella an option to buy his house. Stella, as the optionee, is obligated to: A.exercise the option at the end of the option period B.apply for a zoning change, if one is necessary in order to use the property in the way Stella wants C.pay consideration for the option right D.record the option
C.pay consideration for the option right Some consideration must pass from optionee to optionor. A mere statement of consideration is not adequate. Recording the option is advisable, but not required.
In a bilateral contract: A.a duty will be performed by one party only B.one party can restrict the performance of another party C.two parties have exchanged promises, and both parties are obligated to perform D.all parties have fully performed their duties
C.two parties have exchanged promises, and both parties are obligated to perform In a bilateral contract, two parties have exchanged promises and both parties are obligated to perform.
A contract signed by a person who was intoxicated at the time of the signature would be: A.valid B.void C.voidable by the intoxicated party D.voidable by the other non-intoxicated party
C.voidable by the intoxicated party A contract signed by a person who is temporarily incompetent (through intoxication, for instance) may be voidable, if the person takes action to rescind the contract within a reasonable time after regaining competency.
Agent Bob receives a deposit with a written offer that includes a five-day acceptance clause. On the second day, Buyer Martha notifies Agent Bob that she is withdrawing her offer and wants her deposit returned. Seller Lou hasn't accepted the offer yet. In this situation: A.Bob notifies Lou that Martha is withdrawing her offer, and Bob and Lou each keep half of the deposit B.Bob keeps the entire deposit as his commission C.Martha can't withdraw her offer; it must remain open for the full five days D.Martha has the right to revoke her offer and get her money back at any time before Lou accepts the offer
D.Martha has the right to revoke her offer and get her money back at any time before Lou accepts the offer An offer can be revoked at any time prior to notification of acceptance.
Mark is selling his property, which has an unfinished basement. He gets a full-price offer from Susan, but the offer requires Mark to finish the basement prior to closing. Do Mark and Susan have a binding contract? A.Yes, because both parties have made offers to each other B.Yes, because Susan made a full-price offer C.No, because a valid offer must be written and recorded D.No, because Mark has not accepted Susan's offer
D.No, because Mark has not accepted Susan's offer For a valid contract to exist, there must be offer and acceptance. An advertisement (like a listing) is not considered an offer, only an invitation to negotiate. The buyer's offer is just that: an offer, without an acceptance.
After a purchase agreement has been signed, but before the transaction closes, the buyer attempts to have the contract voided. It is likely he will be able to prove that, because of bipolar disorder, he was mentally incompetent at the time the contract was signed. Is the contract still valid? A.Yes, because mental illness does not factor into questions of contractual capacity B.Yes, because the deed has already been placed into escrow C.No, because buyers are entitled to rescind contracts before closing D.No, because his temporary incapacity allows him to rescind the contract
D.No, because his temporary incapacity allows him to rescind the contract A contract signed by a person who was temporarily incompetent at the time may be voidable, if the person takes action within a reasonable period of time after regaining competency.
Two parties enter into an option agreement, scheduled to end in December. However, in October the optionee decides he doesn't want to buy the property. What should the parties do in order to terminate the option? A.Complete a formal statement of novation B.Exercise the option's contingency clause C.File an interpleader action so a court can void the contract D.Nothing; the option will expire automatically
D.Nothing; the option will expire automatically An optionee must take an affirmative step to exercise an option, by giving written notice of acceptance to the optionor. If the optionee does not do so by the end of the option period, the option automatically expires.
Of the following types of contracts, which one is a unilateral contract? A.Escrow instructions B.Exclusive right-to-sell listing C.Lease D.Option
D.Option An option is a unilateral contract; in other words, only one party is obligated to act. Exercising the option creates a bilateral purchase and sale contract.
An executor listed her aunt's property. While showing the property to the agent, the executor said that her aunt always had tenants in the upstairs apartment. Without checking with zoning, the agent listed and sold the property as multifamily. If the property is not zoned multifamily, does the buyer have the right to rescind the contract? A.No, because the executor should have checked to determine the zoning of the property B.No, because the title company should have checked to determine the zoning of the property C.Yes, because the agent misrepresented the property and any contract entered into under misrepresentation is void D.Yes, because the agent misrepresented the property and any contract entered into under misrepresentation is voidable
D.Yes, because the agent misrepresented the property and any contract entered into under misrepresentation is voidable The agent's misstatement is an example of constructive fraud: when a person who occupies a position of confidence and trust makes a false statement with no intent to deceive. Fraud is a negative force, that makes contracts voidable by the injured party.
Mutual consent (offer and acceptance) is one of the requirements of a valid contract. All of the following are true regarding offer and acceptance, except: A.a counteroffer changes the legal position of the offeror to offeree, and the offeree becomes the offeror B.an offer can be revoked before it is accepted C.the offeree can accept an offer, reject an offer, or make a counteroffer D.an offer to purchase real estate will become a binding contract when it's accepted orally
D.an offer to purchase real estate will become a binding contract when it's accepted orally The statute of frauds requires real estate contracts to be in writing. An oral acceptance of an offer will not create a binding contract.
A real estate contract, in order to be valid, must include: A.a contingency B.a "time is of the essence" clause C.an option D.consideration
D.consideration Any contract, whether for real estate or anything else, must include consideration as one of the four basic elements.
Victoria receives an offer from Lloyd for her property. The offer is for $225,000, and she receives it on Friday morning. On Saturday, she counters by changing the purchase price to $235,000. The counteroffer states that Lloyd has 48 hours to accept the offer. On Sunday, Lloyd rejects the counteroffer. Victoria immediately accepts Lloyd's original offer. Under these circumstances, the agreement is: A.valid, because Victoria accepted all the terms of Lloyd's original offer B.valid, because Victoria accepted a written, valid offer C.not valid, because Victoria did not accept the offer within a reasonable period of time D.not valid, because Victoria terminated Lloyd's original offer when she made the counteroffer
D.not valid, because Victoria terminated Lloyd's original offer when she made the counteroffer A counteroffer serves to terminate an offer. Once an offer has been rejected, it cannot be accepted. At this point, though, Victoria may simply make a new offer to sell the property to Lloyd for $225,000, and hope that he hasn't changed his mind.
Martha gave Hannah the right to purchase her vacant lot for $65,000. Hannah paid Martha $1,200 for this right. Hannah is the: A.mortgagor B.mortgagee C.optionor D.optionee
D.optionee Martha gave the option to Hannah, so Martha is the optionor and Hannah is the optionee.
If a party has an option to buy a piece of property, that person: A.is obligated to purchase the property at the end of the option period B.must pay off all of the seller's existing liens on the property C.can take out a loan on the property, in the seller's name D.paid consideration for the option
D.paid consideration for the option Consideration must be paid for an option.
Anna and June enter into a contract where Anna agrees to sell her house to June. Anna later changes her mind and refuses to sell. June then sues Anna to force her to go through with the contract. This is known as a suit for: A.injunction B.damages C.lis penden D.specific performance
D.specific performance This is a suit for specific performance. Specific performance is a legal remedy in which a court orders the breaching party to perform the contract as agreed, rather than simply paying damages.
In an option: A.no consideration is required B.the seller is the optionee and the buyer is the optionor C.the seller must apply the option money to the purchase price if the optionee exercises her option D.the option agreement must clearly state all the terms and conditions of the sale
D.the option agreement must clearly state all the terms and conditions of the sale The option agreement also serves as the sale contract once the option is exercised, so all terms and conditions of the sale need to be included in the option agreement.
A property is listed for $275,000. The buyers offer $265,000, and insist that the gourmet six-burner stove remain with the property. When the signed offer is presented to the sellers, the sellers accept the price, but want to take the stove with them. They cross out the item about the stove, sign the form, and return it to the buyers. Under these circumstances: A.there is now a valid contract that has been signed by all parties B.the offer has been invalidated and the buyers will need to begin looking for a new property C.the sellers can turn around and accept the original offer, if the buyers won't go along with giving up the stove D.the original offer is terminated, and the sellers have made a counteroffer
D.the original offer is terminated, and the sellers have made a counteroffer Even though the sellers accepted the price change, they still changed the terms of the offer by altering the part about the stove. This had the effect of terminating the offer and creating a counteroffer. The sellers, in essence, become the new offerors.
Jerry offered to buy some vacant land for $500,000. There were no contingencies in his offer, and it was accepted by the seller. Jerry was planning on building a shopping center on the property, but didn't mention this to the seller or his real estate agent. A few days before closing, Jerry learned that his financing for the shopping center had fallen through. The contract is: A.void B.voidable C.unenforceable D.valid
D.valid The contract is valid. Since it was not made contingent on financing for the shopping center, Jerry is liable for performance; if he can't find some way to buy the property, at the very least he is likely to lose his earnest money deposit.