Unit 11 - Deceptive Trade Practices and Consumer Protection Act

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An enforceable waiver of rights to sue under DTPA would require that A) all these conditions be met to have an enforceable waiver of rights. B) the waiver be in writing and signed by the consumer. C) the consumer and the defendant be in relatively equal bargaining positions. D) the consumer be represented by legal counsel.

all these conditions be met to have an enforceable waiver of rights.

TJ is a broker, but he is not a member of the Texas Association of REALTORS®. In representing clients, he is routinely asked to provide information about property, or a seller tells him something about the property that he is worried about passing on to potential buyers because he has no idea whether what he has been told is true or not. What can TJ do to make sure that if someone sues him under the DTPA, he has some protection for any information he provides? A) TJ should use the TAR Notice of Information from Other Sources. B) TJ should have his attorney create a form for him that complies with the DTPA that he can use to pass on the information. C) TJ should just tell the person what he knows and that he doesn't know whether it's true, and they should investigate the issue themselves. D) TJ should use the TREC Notice of Information from Other Sources.

TJ should have his attorney create a form for him that complies with the DTPA that he can use to pass on the information.

Which of the following is a required element of fraud? A) Intention to deceive B) Breach of warranty C) False statements about a person D) Opportunity for profit

Intention to deceive

The DTPA provides that a consumer can sue if the consumer has suffered economic damages produced by unconscionable action by another. "Unconscionable" means A) that a person has lied to the consumer. B) that a person has taken advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree. C) that the consumer is not aware of being taken advantage of by another person. D) that the consumer has lost the ability to distinguish between right and wrong.

that a person has taken advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.

How does a consumer prove that a person's false or misleading act was the producing cause of his harm? A) By showing that the consumer relied on a person's false or misleading act to the consumer's disadvantage B) By showing that the defendant intended to harm the consumer C) By showing that the defendant breached his duty D) By showing that the defendant owed the consumer a duty

By showing that the consumer relied on a person's false or misleading act to the consumer's disadvantage

Seller John has listed his home with broker Bella. John tells Bella that a recent death on the property was due to a suicide, when in fact it was a homicide. Who is potentially liable for a civil suit under the DTPA if Bella does NOT disclose the death to a potential buyer? A) Only seller John B) Neither C) Both broker Bella and seller John D) Only broker Bella

Only seller John

Which of the following is a reasonable defense brokers may use against DTPA lawsuits? A) A broker may claim that he didn't know the information he provided was false. B) A broker supplied a timely written notice that he is relying on written information supplied by someone else. C) All of these are good defenses against a DTPA lawsuit. D) A broker may claim that he received no financial advantage through accidental misrepresentation.

A broker supplied a timely written notice that he is relying on written information supplied by someone else.

Janie is a sales agent representing a seller under a listing agreement. Sally knows that the house has plumbing problems but fails to disclose such problems to potential buyers. Which of the following is a TRUE statement regarding Janie's culpability if the buyer sues her for negligence? A) A buyer must show that Janie has a duty to disclose the information to him. B) The fact that Judy represents the seller is a defense to negligence. C) Janie is not liable for negligence because her fiduciary duties are to the seller. D) A buyer need not prove that Janie owed a duty to him.

A buyer must show that Janie has a duty to disclose the information to him.

Which of the following is an exemption for license holders providing broker services under the DTPA? A) A broker advising a client in all cases B) A broker advising a client if the broker fails to disclose information that he has no knowledge of C) A sales agent advising a client in all cases D) A sales agent advising a client, as long as the advice is not an express misrepresentation of material fact

A sales agent advising a client, as long as the advice is not an express misrepresentation of material fact

According to case law interpreting the professional services exemption to the DTPA, what type of statement is NOT covered by the professional services exemption? A) A statement of judgment B) A statement of advice C) A statement of opinion D) A statement of fact

A statement of fact

The DTPA prohibits which of the following? A) All of these B) Omissions C) Misrepresentations D) Misleading statements

All of these

A disgruntled consumer who files a lawsuit in court may NOT also file a complaint with the Texas Real Estate Commission. True False

False

Proving misrepresentation is more difficult than proving fraud. True False

False

The Deceptive Trade Practices and Consumer Protection Act (DTPA) is a powerful weapon for consumers. True False

True

Unconscionable action in the DTPA is a vague term that allows courts to use their discretion in deciding cases where persons have been tricked or swindled. True False

True

A buyer may sign a waiver to the right to sue the seller under DTPA. True False

True

During the time covered by the notice of intent to bring suit, a defendant can make an offer to settle the matter with the consumer. True False

True

Fraud is a deceptive act practiced deliberately by one person in an attempt to gain an unfair advantage over another. True False

True

Cheryl is a broker who represents an owner of a commercial garage in downtown Houston under a commercial listing agreement. She also represents the buyer under a buyer representation agreement, and she is acting as an intermediary in the transaction. In the purchase agreement, the seller agrees to provide to the purchaser all relevant financial information concerning the garage. Cheryl is aware that the information the seller provided has several material inconsistencies, but she fails to disclose the inconsistencies to the buyer and merely states that the buyer should closely look at the information. After closing, the buyer discovers that the garage isn't making as much money as the financial records indicated. If the buyer files a DTPA lawsuit against the broker, which of the following would apply? A) Cheryl is likely not protected by the exemption for real estate services because she is acting as an intermediary B) Cheryl will likely not be protected by the exemption if the buyer shows that Cheryl knew of the inconsistencies and failed to disclose them to the buyer. C) Cheryl is likely not protected by the exemption for real estate services because this is a commercial transaction. D) Cheryl will likely be protected by the exemption because this is a commercial transaction.

Cheryl will likely not be protected by the exemption if the buyer shows that Cheryl knew of the inconsistencies and failed to disclose them to the buyer.

Gerald, a sales associate for Coastal Realty, is contacted by his friend Harry. Harry is in a hurry to sell but says he will list the property with Gerald if Gerald will market it for $318,000. Gerald conducts a CMA but fails to disclose the results to Harry because it supports a much lower price compared to comparable sales in the area. Gerald is convinced he can sell it for $318,000. Gerald takes the listing at $318,000. Nine months later the property goes into foreclosure when Harry is unable to keep up with the mortgage payments. Under what conditions could Gerald's actions serve as a basis for a DTPA claim? A) Gerald failed to disclose the CMA to Harry; thus, his actions did not involve matters of advice, judgment, or professional opinion. B) Harry was a friend of Gerald, and therefore the chance of misrepresentation is increased. C) A DTPA claim would need to show a connection between Gerald's actions in not conducting a CMA and the reason that Harry was unable to keep up with the mortgage payments. D) Gerald is a sales agent rather than a broker; thus, it is questionable if his experience would support a claim that he provided advice, judgment, or professional opinion.

Gerald failed to disclose the CMA to Harry; thus, his actions did not involve matters of advice, judgment, or professional opinion.

Mark is a sales agent representing a seller under a listing agreement. Anna knows that the house has plumbing problems, and she hears the seller tell a buyer that the house has no problems. Which if the following is a TRUE statement regarding Mark's culpability if the buyer sues him for statutory fraud? A) Mark is not liable because he did not make the statement, the seller did. B) Mark is liable only under common law fraud, not statutory fraud. C) Mark is not liable if he proves that he is the seller's agent. D) Mark is liable if he stood to benefit from the misrepresentation.

Mark is liable if he stood to benefit from the misrepresentation.

Tom was a buyer's broker for Patrick when they purchased the home next to Paul, who is Peter's brother. When Tom showed Patrick the property, Tom said that the roof had been replaced five years ago, when he knew that the roof was really 10 years old. Patrick insisted on placing a higher offer on the property than Tom advised because he was intent on living next to his brother. When the roof leaked, Patrick later accused Tom of fraud. Will Patrick be successful in his fraud case against Tom? A) No, as a broker, Tom does not need to be an expert on the age of roofs. B) Yes, Tom knew the roof was older than he said it was. C) Yes, Tom should have advised Patrick on making a low bid to compensate for the roof. D) No, Patrick did not rely on the roof information to make his decision to buy.

No, Patrick did not rely on the roof information to make his decision to buy.

What was the intent for the change to the DTPA in 2011 to exempt brokers and sales agents acting in a real estate brokerage capacity? A) To clarify that brokers and sales agents should not be held liable under the DTPA for failing to disclose factual information known to the agent B) To clarify that brokers and sales agents should not be held liable under the DTPA for any reason C) To clarify that brokers and sales agents should not be held liable under the DTPA for giving bad advice related to a real estate transaction D) To clarify that brokers and sales agents should not be held liable under the DTPA for fraud

To clarify that brokers and sales agents should not be held liable under the DTPA for giving bad advice related to a real estate transaction

If a license holder is found liable in a DTPA lawsuit, the court may NOT suspend or revoke the real estate license. True False

True

What does intentionally mean under the DTPA? A) Actual awareness that the act was illegal and actual awareness that the act was false B) Actual awareness of the falsity of the deceptive act and intent that the consumer act in detrimental reliance on the act C) Subjective awareness that the act was illegal D) Actual awareness that the act was false and legal

Actual awareness of the falsity of the deceptive act and intent that the consumer act in detrimental reliance on the act

An email from a broker offering a rebate in a case where the broker did not, in fact, pay the rebate after closing is which of the following? A) An implied misrepresentation of material fact B) An express misrepresentation of material fact C) An express representation of subjective fact D) An implied representation of objective fact

An express misrepresentation of material fact

A good defense for license holders is to indicate that they really did not know that their action was illegal. True False

False

Before filing a lawsuit under DTPA, a consumer must give the would-be defendant a 30-day notice of intent to bring the lawsuit. True False

False

License holders feel comfortable that they understand how the courts will interpret the phrase "professional service" as used in the DTPA exemption for real estate license holders. True False

False

Mary, the designated broker for Lake Country Realty, Inc., is asked to provide a comparative market analysis (CMA) for a property owned by Dr. Lang in a large subdivision. Most properties in the subdivision are of similar construction and size with three bedrooms and two baths. Over the years, however, Lang has added a small office and a half-bath to his home. So Mary obtains data on nine comparable properties in the subdivision and then makes upward adjustments to her recommended listing price based on the addition of the half-bath and office. Ultimately, the property sells for slightly more than the other properties with no half-bath or office, but considerably less than Mary had projected. Mary's services would probably serve as the basis for a cause of action under the DTPA. True False

False

The DTPA requires that the consumer prove that the offending party intended to deceive or misrepresent the facts. True False

False

There are few defenses that a broker may employ to deflect a DTPA lawsuit. True False

False

Karen is a broker who represented a seller, Cory, under a listing agreement wherein Cory sold some property to a buyer, Frank. Frank is extremely unhappy with the outcome of the transaction because he discovers major defects in the property and suspects that Karen and Cory conspired to defraud him. After discovering several defects, Frank immediately files a lawsuit against Cory and Karen alleging, among other things, violations of the DTPA. What was Frank required to do before filing suit against them under the DTPA? A) Frank must send a demand letter to Karen and Cory advising them of the complaint and the amount of damages he has suffered. B) Frank must first file a complaint with TAR against Karen and Cory. C) Frank must verify that he is a consumer as defined in the DTPA and file such verification in the court in which the lawsuit will be filed. D) Frank must first file a complaint with TREC against Karen.

Frank must send a demand letter to Karen and Cory advising them of the complaint and the amount of damages he has suffered.

A sales associate provides a comparative market analysis to a seller who she represents under a residential listing agreement. The sales associate used the wrong data to reach her conclusion to advise the seller about the listing price. The seller lists the home based on the information provided by the agent, and then the seller finds out after selling the property that comparable homes in the area sold for more than $20,000 more than the sales price of her home. Can the sales agent be held liable under the DTPA? A) If the seller shows that the agent was incompetent B) Only if the seller can prove than the agent's actions were unconscionable C) Only if the information cannot be characterized as advice or opinion D) If the seller shows that the act was not advice or opinion, and that the agent made an express misrepresentation

If the seller shows that the act was not advice or opinion, and that the agent made an express misrepresentation

Shelby is an associate broker with Ace Realty, and she is representing a buyer by oral agreement in the buyer's purchase of raw land. Shelby has advised the broker on several transactions in the past, so the buyer trusts her to provide him with good advice. Shelby tells the buyer that she thinks the purchase is a good investment for commercial development because she has analyzed recent raw land purchases in the area that are going for much more because a tollway will be going up near the location of the land. In fact, once the purchase has closed and funded, the buyer learns that the property will be condemned by the state because it needs the property for the tollway right of way, so the buyer sells the property to the state for a loss. If the buyer sues Shelby, is Shelby likely liable under the DTPA? A) No, Shelby's statement was an express misrepresentation, but it was not material. B) No, not if Shelby's statement is considered advice or opinion and not an express misrepresentation or unconscionable action. C) Yes, the exemption only applies to license holders in residential transactions. D) Yes, Shelby does not have a written agreement, so the exemption for real estate agents does not apply.

No, not if Shelby's statement is considered advice or opinion and not an express misrepresentation or unconscionable action.

A consumer has sent a demand letter to a broker notifying the broker that the consumer has filed a lawsuit against the broker for violations of the DTPA. The demand letter indicates how the broker has caused harm to the consumer and indicates that the consumer will be asking for a trial by jury in order to have a jury tell him how much damage he has suffered based on the broker's actions. Does the demand letter comply with the DTPA? A) No, the demand letter must be sent to the defendant's attorney. B) Yes, the demand letter states that a jury will decide how much the consumer is owed. C) Yes, it provides the broker with enough information so that the broker can figure out what happened. D) No, the demand letter must be sent at least 60 days before a lawsuit has been filed.

No, the demand letter must be sent at least 60 days before a lawsuit has been filed.

Is a home inspector licensed by TREC subject to the waiver in the DTPA that applies to real estate license holders? A) Yes, since TREC licenses home inspectors, they are subject to the same laws as brokers and sales agents. B) No, home inspectors do not provide advice and opinions. C) Yes, as long as the home inspector raises the exemption in the litigation. D) No, the referenced DTPA exemption applies only to persons licensed under Chapter 1101 of the Occupations Code.

No, the referenced DTPA exemption applies only to persons licensed under Chapter 1101 of the Occupations Code.

If an act is done knowingly under the DTPA, up to what amount of monetary damages can the consumer collect? A) Not more than three times mental anguish damages B) Not more than three times economic damages C) Economic damages only D) Mental anguish damages only

Not more than three times economic damages

Which of the following is a way for a license holder to limit her liability in a transaction that may be subject to the DTPA? A) Provide a written or oral statement to the consumer that the license holder received written information from another source B) Provide a written statement to the consumer that the license holder received written information from another source C) Provide a written statement to the consumer that the license holder received written or oral information from another source D) Provide a written or oral statement to the consumer that the license holder received any written or oral information from another source

Provide a written statement to the consumer that the license holder received written information from another source

Which of the following is NOT a relief for damage under the DTPA? A) Revocation of the broker's license B) Money damages C) Cancellation of the broker's commission D) Rescission of a contract

Revocation of the broker's license

In order to collect economic damages under the DTPA, what must the consumer show? A) That the person made a knowingly false statement, and the consumer had actual awareness of its falsity B) That a person made a false statement, and the consumer knew it was wrong C) That the person made a false statement, and the consumer did not rely on the statement D) That a person made a false statement, and the consumer relied on the statement

That a person made a false statement, and the consumer relied on the statement

Which of the following is an example of a defense against a DTPA lawsuit that was unsuccessfully claimed by a defendant? A) The consumer does not waive a DTPA claim by a consumer accepting a defective home. B) A DTPA lawsuit is groundless if a written agreement limiting a defendant's liability for repair of a defect to a set amount that is less than an expert's estimate of the cost of repairing the defect. C) A consumer is barred from filing a DTPA claim because an examination of county records could have disclosed the defendant's deception. D) The consumer waives a DTPA claim by a consumer accepting a defective home.

The consumer waives a DTPA claim by a consumer accepting a defective home.

Jim engaged broker Billy to represent him in finding a home to purchase. Jim had never bought a property before and was apprehensive about the process. Jim was full of questions, both insightful and silly. Billy, being an experienced and patient agent, answered all of Jim's questions to the best of his ability. Billy was stumped by one question, however. Jim was concerned about climate change and whether or not the home he was considering might flood in the future. Billy referred Jim to the FEMA and www.floodsmart.gov websites so that Jim could better understand how to identify the risk of a flood for the property that he was considering. After repeated questions by Jim about whether or not the house he was buying would flood, Billy assured him that, according to everything he had researched and based on his discussions with Jim's lender, it had never flooded in that location, and there was almost no chance that the home would be flooded. Jim closed on the home and all was well for a few months. Then without warning, a monsoon-type rain began to fall, and the quiet little stream that was several blocks from Jim's property became a roaring river that overflowed its banks and flooded every building in town. Jim's house and its possessions were a total loss and, because Jim had not purchased flood insurance, a total uninsured loss. Jim now claims that Billy misrepresented a material fact about the likelihood that Jim's house would be damaged by a flood and that it was also an unconscionable act because Billy took advantage of Jim's lack of knowledge and experience to a "grossly unfair degree." Because of this, Jim asserts that Billy was not covered by the 2011 exemption. Was Jim's lawsuit against Billy legitimate or groundless? A) The lawsuit is legitimate; even though the home was in a very low-risk area, Billy should have helped Jim arrange for this coverage. B) The lawsuit is groundless; Billy had clearly gone well beyond what was required to satisfy Jim's questions about flood insurance, including giving Jim the resources to review the situation for himself. Jim knows this but still wants to make Billy feel financial pain because Billy wasn't able to predict the future. C) The lawsuit is legitimate; every homeowner should be advised by the license holder with whom they are working to purchase flood insurance. D) The lawsuit is groundless because it is never the license holder's role to discuss any aspect of flood insurance.

The lawsuit is groundless; Billy had clearly gone well beyond what was required to satisfy Jim's questions about flood insurance, including giving Jim the resources to review the situation for himself. Jim knows this but still wants to make Billy feel financial pain because Billy wasn't able to predict the future.

A sales agent represents a seller under a listing agreement. If the seller tells her sales agent that the house was recently treated for termites, what should the agent do with the information to limit her liability under the DTPA? A) The sales agent should get a copy of the treatment report and attach it to a notice that states the agent was relying on the report. B) The sales agent should call the buyer's agent, tell her about the treatment, and tell her that she should independently walk around the property and look for signs of treatment. C) The sales agent should call the buyer's agent, tell her about the treatment, and tell her that she has no reason to believe the owner. D) The sales agent should call the buyer's agent and give her the information.

The sales agent should get a copy of the treatment report and attach it to a notice that states the agent was relying on the report.

In 2011, the Texas Legislature amended DTPA to provide an exemption for real estate license holders so that they would not be held liable for innocent acts of omission or for advice and opinions given without an attempt to defraud or deceive. True False

True

In the case Smith v. Levine, the court found that the Smiths engaged in deception and acted in an unconscionable manner when the Smiths did not disclose severe problems with the foundation to the Levines. True False

True

Thomas is a commercial broker. He is representing the buyer in the purchase of an apartment complex in Dallas. Thomas also represents the seller. Both have authorized intermediary. The seller's attorney discloses to Thomas via email that the property has a serious foundation issue. Thomas forgets to pass the information on to the buyer, and the buyer ends up purchasing the property, unaware of the foundation problems. Will Thomas likely be liable to the buyer for negligence? A) Yes, if the buyer can show that Thomas acted intentionally. B) No, he will only be liable for fraud. C) No, brokers acting as intermediaries have limited liability to buyers. D) Yes, Thomas owes the buyer a duty of disclosure of material facts.

Yes, Thomas owes the buyer a duty of disclosure of material facts.

Is a real estate broker in Texas allowed to accept a listing that will be sold "as is?" A) Yes, as long as the broker uses his company's "as is" boilerplate clause. B) Yes, the TREC-promulgated contract contains an "as is" clause. C) No, it is a violation of DPTA. D) No, it is a violation of DPTA and TRELA.

Yes, the TREC-promulgated contract contains an "as is" clause.

A recent buyer is making a claim of misrepresentation because the property taxes on his newly purchased home are far higher than was disclosed by the seller. Could the broker be liable on this claim? A) No, because taxes are required on all properties and are not considered damages. B) Yes, brokers are liable in all cases of damages, regardless of the cause. C) No, because the seller has responsibility for making accurate tax disclosures. D) Yes, the broker cannot claim that she merely passed along information from the seller.

Yes, the broker cannot claim that she merely passed along information from the seller.

To avoid claims of misrepresentation, brokers must watch what they say because they are A) fiduciaries for all parties in the transaction. B) considered real estate experts. C) equivalent to real estate attorneys. D) responsible for treating all parties equally.

considered real estate experts.

Under DTPA, "documentary material" would include all of the following EXCEPT A) a tape recording of phone conversations. B) hearsay conversation. C) a rough draft of the buyer's representation agreement with the broker. D) notes made on napkins at a restaurant.

hearsay conversation.

Rosie Ruiz, a listing associate with Camp Zama Realty, does not mention to a prospective buyer that the 100-acre tract of land might soon be incorporated within the city limits. The announcement was in the local paper that morning. Rosie had not read about it because she seldom bothers to read the paper. Rosie has A) misrepresented and committed fraud. B) committed fraud. C) misrepresented by commission. D) misrepresented by omission.

misrepresented by omission.

Misrepresentation does NOT always include A) two parties. B) the intention to deceive. C) a false statement. D) another's decision to contract.

the intention to deceive.


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