Section 3 Chapter One

Legal Purpose

Courts cannot be called upon to enforce contracts that require one to break the law. Contracts must have legality of object.

The correct answer is: True

Courts will not enforce contracts that require one to do something that is illegal. Select one: a. True b. False

The correct answer is: Executory.

During the period of time after a real estate contract is ratified, but before title actually passes to the buyer, the status of the contract is: Select one: a. Voidable. b. Executed. c. Executory. d. Implied.

The correct answer is: The seller was under the influence of alcohol when the contract was signed.

A broker has entered into a signed listing agreement. Which of the following reasons would make the agreement voidable? Select one: a. The agreement specifies that no other broker may show the property. b. The seller, being illiterate, signed the agreement with an "X". c. The seller was under the influence of alcohol when the contract was signed. d. The contract specified a 10% commission to be paid.

Condition

A condition is something that is established, or is agreed upon, as a prerequisite to the doing or taking effect of something else.

The correct answer is: Prospectus.

A contract may be all of the following EXCEPT: Select one: a. Exclusive authorization or right to sell. b. Lease. c. Contract of sale. d. Prospectus.

The correct answer is: The purchaser may request his deposit be returned.

A purchaser submits an offer to a seller with the condition that the property is to be financed by a conventional loan at no more than 10% interest. If the seller agrees but such financing cannot be obtained, which of the following is true? Select one: a. The purchaser loses his deposit but is relieved of further liability. b. The seller is obligated to return the deposit plus interest. c. The purchaser may request his deposit be returned. d. The seller can sue for specific performance.

A. Fraud

A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. It was obvious that the owner had filled in and painted over the crack although the owner advised the sales agent that the seepage problem had been corrected, when in fact it had not. If the salesperson shows the property without advising potential buyers of the seepage problem, the salesperson would be guilty of: Select one: a. Fraud. b. Misrepresentation. c. Puffery. d. Nothing.

The correct answer is: contract.

A written agreement wherein one person agrees to purchase and another person agrees to sell real property is called a/an: Select one: a. agency agreement. b. assessment. c. fiduciary obligation. d. contract.

The correct answer is: Statute of Frauds.

An attorney who wants to know if a particular contract needs to be in writing would look at a state's: Select one: a. Statute of Limitations. b. Statute of Frauds. c. Statute of Contracts. d. Statute of Torts.

The correct answer is: Returned to the buyer

An owner lists a property with a broker. The broker shows the property and receives an offer, but is unable to present the offer to the owner. Two days later, the owner cancels the listing agreement. What should be done with the earnest money deposit received with the offer to purchase agreement? Select one: a. Returned to the buyer b. Given to the seller c. Split between the broker and the seller d. Split between the broker and the buyer

The correct answer is: At any time prior to acceptance.

If the seller makes a counteroffer, when may that counteroffer be withdrawn? Select one: a. At any time before settlement. b. At any time prior to acceptance. c. Within 72 hours. d. Within 24 hours.

The correct answer is: An attorney-in-fact

Mark gives Suzanne the authority to sign for him in a real estate transaction. Suzanne is considered, in the eyes of the law, to be: Select one: a. A broker b. An attorney-in-fact c. An attorney-in-trust d. An attorney-at-law

Estoppel

is a legal doctrine that stops, or prevents, a person from asserting certain rights, or stating certain facts, if such action is judged to be inconsistent with, or contrary to, a previous position.

Rescission

is a legal remedy that terminates the contract and returns the parties to their original positions. It is not necessary to prove that money damages were suffered in order to rescind a contract.

A covenant

is a solemn promise intended as binding. It is an agreement or a pledge between two or more parties.

Good consideration

is often used for a gift deed and is frequently love and affection.

assignment

is the transfer of the right, title, or interest of one person (assignor) to another (assignee). Most real estate contracts are assignable, unless assignment is specifically restricted or prohibited in the contract itself (mortgage contracts, trust deeds, contracts for sale, lease contracts, options).

Breach of contract

occurs when there is a violation of any of the terms or conditions of a contract without legal excuse. The injured party can seek action for money damages or an action for specific performance.

Valuable consideration

usually consists of money or property, but may also be an enforceable promise.

The correct answer is: the name of the lender.

The loan contingency clause in a valid sales contract will contain all of the following except: Select one: a. the amount of the loan. b. the name of the lender. c. the date of the commitment. d. the interest rate of the loan.

Meeting of the Minds

There must be a valid offer made, and an unqualified acceptance of that offer communicated, before an enforceable contract exists.

Legally competent parties

There must be two or more legally competent parties to a contract. A person cannot deed property to himself, but he can deed property to himself and another person.

The correct answer is: False

When someone assigns his contract to buy real estate to a third party, he, the assignor, is no longer liable for the performance of the contract. Select one: a. True b. False

Novation and Assignment

Novation is the substitution of a new legal obligation for an old one, such as the substitution of a new contract, the substitution of a new debtor, or the substitution of a new creditor.

Clearly Identified Property Description

Real estate must be described so that all parties can clearly identify the subject property. A sales contract frequently describes real property by use of an address.

Consideration

The contract must be supported by valid or sufficient, lawful consideration. Each party must bargain for and receive some right or benefit.