Unit 12

What is minimum consideration in a valid contract?

Anything the parties agree is good and valuable

The buyer and seller agreed to a closing date of September 7 and that time is of the essence. Which of these is the closest meaning of the phrase?

Closing must be on or before September 7.

A contract is only valid if it contains a binder.

False

A contract that may be rescinded or disaffirmed by one or both of the parties based on some legal principle is void, even though it may appear to be valid.

False

A real estate contract entered into by a minor is void.

False

All contracts must be in writing to be enforceable.

False

An agreement to be bound by most of the terms proposed in an offer constitutes acceptance.

False

An option is a contract by which the optionee gives the optionor the right to buy or lease property at a fixed price within a specific period of time.

False

Assignment is the substitution of a new contract in place of the original one, while novation is a transfer of rights or duties under a contract.

False

In an implied contract, the actual agreement between the parties is inferred from general or vague statements in the written agreement itself.

False

The Uniform Vendor and Purchaser Risk Act provides that the buyer bear any loss for damage to the property that occurs before title passes or the buyer takes possession.

False

The difference between a bilateral and a unilateral contract is the number of parties involved.

False

The essential elements of a contract are offer and acceptance, consideration, legal purpose, and consent and performance.

False

The person who makes an offer is the offeree; the person who accepts or rejects the offer is the offeror.

False

Under a land contract, the buyer obtains both possession and legal title to the property by agreeing to make regular monthly payments to the seller over a number of years.

False

Which of these is an example of a unilateral contract?

Option

A woman offers to buy a man's house for the full $215,000 asking price. The offer contains this clause: "Possession of the premises on August 1." The man is delighted to accept the woman's offer and signs the contract. First, however, the man crosses out "August 1" and replaces it with "August 3," because he won't be back from vacation on the first of the month. He then begins scheduling movers. What is the status of this agreement?

The man has rejected the woman's offer and made a counteroffer, which the woman is free to accept or reject.

A 14-year-old comes into a brokerage office and says, "I want to make an offer on this property. Here is a certified check for 10% of the asking price. Please help me with the paperwork." Why should the broker be concerned?

The sales contract may be disaffirmed by the minor.

A sales contract is an executory contract from the time it is signed until closing; at closing, it becomes an executed contract.

True

An example of an addendum to a real estate sales contract is an attached page that adds a detailed provision that the purchase is contingent on the sale of the buyer's current home within 90 days.

True

An offer or counteroffer may be revoked at any time prior to its acceptance.

True

An option is a unilateral contract.

True

An oral agreement for the sale of real estate is unenforceable.

True

Consideration is something of legal value offered by one party and accepted by the other as an inducement to act.

True

The interest held by a buyer during the time between the signing of a sales contract and the transfer of title is called equitable title.

True

On March 7, a buyer and a seller execute a contract for the purchase of the seller's property. Closing is set for June 10. On April 15, the property is struck by lightning and destroyed by the resulting fire. If the Uniform Vendor and Purchaser Risk Act has been adopted by the state in which the property is located, which party bears liability for the loss?

Under the act, the seller bears the loss alone.

When is an offer considered to be accepted?

When the broker notifies the buyer that the seller has accepted the offer

Which of these is NOT typically a factor in determining the amount of the earnest money deposit?

Whether it is an amount sufficient to cover the broker fees

A seller accepted all of the terms that the buyer offered, making only one small change in the amount of the earnest money. At the moment, these agreements constitute

a counteroffer.

A buyer makes an offer to buy a seller's house. Pursuant to this offer, the buyer is obligated to perform only if the buyer is first able to sell her condominium. This is an example of

a property sale contingency.

If a contract does NOT contain a time or date for performance, the act should be done within

a reasonable time.

All of these are essential to a valid real estate sales contract EXCEPT

an earnest money deposit, held in an escrow account.

If a man threatens another man with violence in order to get him to sign a contract to sell property for a low price, the contract is voidable because there is lack of

consent.

Additional conditions that must be satisfied before a sales contract is fully enforceable are called

contingencies.

The amount of the earnest money in a sales contract should

discourage the buyer from walking away from the agreement.

A real estate broker announces to the salespeople in her office that she will pay a $1,000 bonus to the top-selling salesperson each quarter. This contract is an

express unilateral contract.

In case the buyer decides not to buy for no legal reason, the contract may provide that the earnest money is there as

liquidated damages.

A woman is buying a man's house and wants to take over the mortgage. The lender releases the man from the obligation, substituting the woman as the party liable for the debt. This new agreement is called

novation

If a man allows a woman to back out of a contract, returns the earnest money to her, and both are back to the positions they held before the contract, the contract has been

rescinded.

After making an offer but prior to receiving any response from the seller, a buyer changed her mind about buying a particular lot. She called her agent and said, "Withdraw my offer." Her action is called a

revocation

A buyer and a seller enter into a sales contract for the sale of a home. The seller changes his mind at the last minute, and the buyer suffers a financial loss of $1,500 and must rent a home in which to live. Unless the contract provides otherwise, all of these are legal actions that are likely to succeed EXCEPT

the seller is not liable because the buyer should not have incurred the $1,500 cost before the sale.

The term statute of limitations is BEST described as the limitation on the

time period in which parties to a contract may bring a lawsuit to enforce their rights.

If a contract seems to be valid, but neither party can sue the other to force performance, the contract is said to be

unenforceable.

A contract that is entered into by a person who is under the age of contractual capacity is

voidable

A buyer makes an offer on a house, and the seller accepts in writing. What is the current status of this relationship?

The buyer and seller have an express, bilateral executory contract.