UNIT 5: CONTRACTS QUIZ

What is the document that transfers title of personal property from one person to the other? A. bill of sale B. deed C. settlement statement D. title report

A. A bill of sale transfers title of personal property.

Lora offers to buy Chip's house for $150,000. Chip counteroffers. Lora is the A. counterofferee. B. counterofferor. C. offeree. D. offeror.

A. Buyer Lora, originally the offeror, is now the counterofferee. Chip is the counterofferor.

Rob agrees to rent an apartment from Kristy for three months for $500 a month. He moves in January 1 and moves out March 31. What type of leasehold estate is this? A. estate for years B. periodic estate C. tenancy at sufferance D. tenancy at will

A. This leasehold has a specific time frame, three months, along with a set payment per month.

Lisa has a contract to buy Bill's house for $150,000. She made a $6,000 earnest money deposit, which was specified to be used as liquidated damages if necessary. Lisa does not show up at settlement. It takes Bill six months to find another buyer, who offers him only $134,000. How much can Bill most likely sue Lisa for in compensatory damages? A. $6,000 B. $10,000 C. $16,000 D. however much he wants for his pain and suffering

B. Bill can sue for compensatory damages, which is the amount he's lost ($16,000) minus the liquidated damages he should have already recovered ($6,000).

A seller and buyer agree on terms of a purchase and sale agreement and are now waiting for closing to occur. Unfortunately, before closing occurs, the detached garage on the property is struck by lightning, catches fire, and is totally destroyed. What is LEAST LIKELY to be the buyer's remedy? A. accept the property as is B. accept the property and claim the insurance proceeds C. require the seller to rebuild the garage D. terminate the contract

C. The buyer may terminate the contract due to impossibility of the seller to perform or accept the property as is. The buyer has equitable title and may claim any insurance proceeds for real property damage (but not the seller's personal property, unless that was included in the contract).

Each of these costs is typically paid by the buyer EXCEPT A. discount points. B. escrow reserves. C. existing lien payoff. D. mortgage insurance premiums.

C. The seller is responsible for ensuring that any existing liens are discharged.

Which action transfers title? A. Doug decides to give his property to his son, Alex. B. Doug signs a deed that conveys title to Alex. C. Doug hands the signed deed to Alex, who accepts it. D. Alex takes the deed to the county recorder's office to be recorded.

C. The title is transferred once there has been delivery and acceptance of the deed.

Lucy lives in a townhouse that she rents from Joey. Joey's deed is NOT recorded in county records. Bob, a prospective buyer, has A. actual notice that Joey owns the property. B. constructive notice that Joey owns the property. C. inquiry notice that Joey has an interest in the property. D. inquiry notice that Lucy has an interest in the property.

D. Joey's deed may not be recorded, but Lucy is in possession of the land, even though she doesn't own it. As a buyer, Bob would reasonably be expected to make further inquiry.

The covenant of __________ is a guarantee that the grantor has the right to convey the property. A. chattel B. hypothecation C. rescission D. seizen

D. Seizen is the ownership of a freehold estate. The covenant of seizen is a guarantee that the grantor has the right to convey that estate.

Larry has a will that leaves his house to his grandson, Sean. When Larry dies, Sean is ________ and his interest was created by ________. A. co-owner / deed B. co-owner / devise C. sole owner / deed D. sole owner / devise

D. The property was transferred to new sole owner Sean through devise, which is Larry's will.

What is the name of the document that sets forth all details of the agreement between a buyer and a seller and establishes their legal rights and obligations? A. counteroffer B. deed C. escrow agreement D. sales contract

D. This is a sales contract, also known as an agreement of sale, among other names.

Kara signs a one-year lease with landlord Lenny and moves into a new apartment. Which is NOT an example of novation? A. A balcony unit opens up, so Lenny substitutes a new lease for that unit and Kara moves. B. Kara and Lenny substitute her sister's name on the rental agreement. C. Kara and Lenny tear up her one-year lease and replace it with a two-year lease. D. Kara's lease is up and Lenny lets her remain in the apartment month-to-month.

D. Novation is substitution of one contract for another or one party to the contract for another. Kara staying on after her lease is up is an example of periodic tenancy.

Your roommate from college moves to your town. You let her move in with you while she is looking for a job. What type of leasehold estate is this? A. estate from year to year B. periodic estate C. tenancy at sufferance D. tenancy at will

D. Since there is no specific time frame for the end of the lease, nor is there money exchanged, this is a tenancy at will. If the old roommate agrees to pay you some money once a month, then you would have a periodic tenancy.

Larry signed a contract to buy Bob's house. However, the deadline in the contract has passed and Larry has not finalized the loan with his mortgage company. There is NOT a "time is of the essence" clause in their contract. The contract is considered A. discharged. B. rescinded. C. void. D. voidable.

D. The contract is voidable by Bob because Larry did not perform by the stated deadline. Bob could choose to wait for the loan to clear and go forth with the contract. Had there been a "time is of the essence" clause, the contract would automatically be void when the deadline passes.

What is the most common way to transfer title? A. adverse possession B. eminent domain C. involuntary alienation D. voluntary alienation

D. Voluntary alienation is the voluntary transfer of an interest in real property usually done by sale or gift.

When a person dies with a will, it's considered __________. When a person dies without a will it's called __________. A. descent / devise B. intestate / devise C. intestate / testate D. testate / intestate

D. With a will is testate; without a will is intestate.

Julia contracts with Joe to create the lace wedding dress she designed. Joe shows up at the first fitting with a pink satin dress, although the design is similar. Joe demands the full $8,200 indicated in the contract. Julia refuses to pay. He sues, and the court rules that Julia owes him nothing because this was A. a material breach. B. partial performance. C. specific performance. D. substantial performance.

A. A breach of contract significant enough to excuse the non-breaching party from performing the contractual obligations is considered a material breach.

Paula is selling her house. She changes the terms proposed by the buyer in the sales contract, creating a/an A. counteroffer. B. modification agreement. C. notification of acceptance. D. offer and acceptance.

A. A counteroffer is a rejection of the original offer, substituting a change in terms.

Carol and Leslie enter into a contract stating that Carol will pay Leslie $650 per month for the next 20 years. Carol will live in the house and pay all expenses including property taxes, insurance, and maintenance costs. Leslie will continue to hold the title until the property is paid off. What kind of contract do they have? A. land contract B. land lease C. lease purchase agreement D. option agreement

A. A land contract, or contract for deed, allows the buyer to make payments over time to the owner, while the owner holds the property title until it's paid in full.

Which element is NOT required in order for a deed to be valid? A. acknowledgment B. consideration C. execution D. granting clause

A. A valid deed must have the names of the parties, consideration, granting clause, legal description, and execution. The acknowledgment is required only to record the deed.

Gary and Tom have a contract. Gary gives consideration that is comparable in value to Tom's consideration. This is considered A. adequate consideration. B. good consideration. C. lawful consideration. D. valuable consideration.

A. Adequate consideration is when both parties give something of similar value. It could be either valuable or good consideration.

In a face-to-face meeting, a farmer offers to pay a roofer $1,500 to install a roof on his barn and the roofer says, "I'll do it tomorrow." What type of contract do they have? A. express bilateral contract B. express unilateral contract C. implied bilateral contract D. implied unilateral contract

A. An express contract is an agreement that has been expressed in words, either spoken or written. They each made a promise for a promise, so it's also bilateral.

Jill tells Rick that she will walk his dog for $40 a week and they shake on the deal. This oral contract is A. express and valid. B. implied and valid. C. unenforceable. D. void.

A. An oral contract such as this is valid, and since Jill and Rick explicitly described the terms, it is an express contract.

Calvin had a contract with Liz to build her a house for $200,000. Before he even breaks ground, Calvin skips town. Liz contracts with Oscar to build the house using the same plans, but he charges $225,000. Liz sues Calvin for breach of contract and is awarded damages. How much is the court most likely to award Liz? A. $25,000 compensatory damages B. $25,000 liquidated damages C. $225,000 punitive damages D. whatever Liz asked for

A. Calvin will likely have to pay her only $25,000 in compensatory damages, the extra amount Liz had to pay.

Elisa names Jim to be the executor of her will. Jim dies before Elisa, but she never updated her will. The court appoints David to carry out the sale of her estate. David will use what kind of deed to transfer Elisa's property to a new owner? A. administrator's deed B. deed of confirmation C. executor's deed D. judicial deed

A. David was appointed by the court as an administrator to dispose of Elisa's estate in the absence of a named executor. David would use an administrator's deed to convey the property. Note that while an administrator's deed is a type of judicial deed, you should always select the more specific response.

Betty signs a listing agreement with Lots-O-Wealth Real Estate Company. They sell her house and she pays them the promised commission. Therefore, all terms of the contract have been met. This contract is now A. discharged. B. liquidated. C. mitigated. D. rescinded.

A. One way in which a contract is discharged or terminated is when all of the terms have been met.

Sally died testate. She has no spouse, no children, and no surviving siblings. Who would inherit Sally's estate? A. her cat Socks, to whom she left everything in her will B. her Grandma Sadie C. her Uncle Joe D. the county where she lived

A. Sally left a will; she died testate. If her will left her estate to her cat, Grandma and Uncle Joe are out of luck.

The Statute of Frauds is a statutory law that requires contracts regarding real estate to A. be in writing to be enforceable. B. have a definite expiration date. C. have adequate consideration. D. include a non-discrimination clause.

A. Statute of Frauds requires all real estate contracts to be in writing to be enforceable.

Mary signs a one-year lease for landlord Sue's house. After six months of paying rent, this lease could be best described as A. bilateral, executory. B. express, executed. C. implied, bilateral. D. unilateral, executed.

A. Sue agrees to give up occupancy to Mary, who agrees to pay rent; this is a bilateral contract. Since the one-year term of the lease is not yet up, the contract is executory.

Which deed guarantees title against all encumbrances occurring during any previous ownership? A. general warranty deed B. grant deed C. limited warranty deed D. special warranty deed

A. That's a general warranty deed. Each of the other choices refers to a deed in which the grantor's warranty extends only to the time of the grantor's ownership.

A written instrument transferring the grantor's ownership of or interest in real property is known as a/an A. deed. B. easement. C. mortgage. D. title.

A. The deed is the instrument that transfers title.

Once a person has gone to the courthouse and reviewed all documents pertaining to the property he intends to buy, he is said to have A. actual notice. B. constructive notice. C. inquiry notice. D. legitimate notice.

A. The law says everyone has constructive notice, or presumed knowledge, of recorded documents. Once you actually have seen the documents that pertain to property ownership, you have "actual" notice.

When a buyer has a right of first refusal, he or she has these rights EXCEPT the right to A. buy property at a specified price within a limited time. B. have the first chance to buy or lease property. C. match any other offer the seller/lessor is willing to accept. D. refuse to purchase or lease property if offered.

A. The right to buy property at a specified price within a limited time describes an option, not a right of preemption; also called a right of first refusal.

A standard form of title insurance policy does not protect against loss resulting from A. encroachment on the property. B. forgery in the chain of title. C. lack of capacity of the grantor. D. liens and encumbrances of record.

A. The title insurance company is insuring that all previous documents in the public record are valid, which includes looking for forgeries and incapacity. An encroachment is the intrusion of a physical object onto the property, and would be disclosed by a survey, not a title search.

Larry bought a house on a land contract. Under this contract, he A. has equitable interest in the property. B. will not have to pay any interest charges. C. will not live at the property until it is paid for. D. will receive the title to the property immediately.

A. Under a land contract, the buyer will not receive title to the property until it is paid off. The buyer holds equitable interest in the property until then.

Adam and Jenny enter into an agreement wherein Adam will buy Jenny's house at the asking price if Jenny will install a new roof and if Adam can qualify for a loan sufficient to cover the purchase. Until the roof is installed and the financing obtained, the contract is said to be A. executed. B. executory. C. rescinded. D. voidable.

B. An executory contract is one in which the parties have agreed to the terms but some conditions still remain to be fulfilled. Once all of the conditions are met and all that remains is the closing, the contract is said to be complete, or executed.

Daphne, a victim of identity theft, can't currently qualify for a loan but wants to buy her friend's condo for $90,000. She could give him $1,000 now, if he promised not to sell to anyone else in the next six months and give her the opportunity to purchase the property within that time period. This is A. a lease purchase agreement. B. an option agreement. C. a purchase contract. D. a right of preemption.

B. Consideration is given with an option so she can purchase the property anytime with the six-month period.

Which of these does NOT involve the sale or possible sale of real property? A. condominium sales contract B. cooperatives sales contract C. land contract D. right of first refusal

B. Cooperatives involve the sale of shares in the corporation, which technically is personal property.

The rule that prevents the admission into court of any prior or simultaneous oral or written agreements that contradict the terms of the written contract is referred to as the A. doctrine of part performance. B. parol evidence rule. C. rule of genuine assent. D. statute of frauds.

B. Evidence concerning negotiations or oral agreements that wasn't included in a contract, parol evidence, is not admitted when a contract dispute ends up in court.

Lou learns that the signature on his recorded deed was forged, and he gets his money back from Douglas. In order to correct the public record, A. the forged deed must be destroyed. B. Lou must sign a quitclaim deed. C. the real owner must bring charges against Douglas. D. the real owners must sign a deed of correction.

B. If Lou grants a quitclaim deed to the real owner, the public record will be corrected and current.

Lori and Luke have a valid contract for Lori to buy Luke's house. The settlement date is Nov. 12. On Nov. 1, Luke tells Lori that he does not intend to sell the house. This is an example of A. a tender offer. B. anticipatory repudiation. C. novation. D. substantial performance.

B. Luke repudiated this contract.

Walton decides to sell his cabin on the lake and offers it in a letter to his regular postman, Bill, at a price of $5,000. The next day, Walton receives a note from a neighbor, a close friend of the postman, who says, "I accept your offer." Is Walton obligated to sell to the neighbor? A. no, because no licensed agent was involved B. no, because only the offeree can accept an offer C. yes, because both the offer and the acceptance were in writing D. yes, because the acceptance was within three days

B. No one but the offeree can accept an offer. The acceptance by the neighbor is not valid, no matter how or when it was communicated. It is, in fact, a new offer, which Walton now may or may not accept, as he chooses.

Walter was living in Champaign when he died intestate. He is survived by his wife, his son from his current marriage, his ex-wife, and his daughter from that previous marriage. According to Illinois laws for intestate succession, who would NOT be entitled to some of Walter's estate? A. his daughter B. his father C. his son D. his wife

B. The father is not included in the succession laws for someone who dies intestate when there is a current spouse and children.

A valid deed requires the signature of the A. grantee. B. grantor. C. grantor and grantee. D. notary of public.

B. The grantor must sign a deed for it to be valid. The grantee never signs the deed. Acknowledgement is only required for the deed to be recorded, the deed is valid without it.

A lender typically requires title insurance to cover the A. buyer. B. mortgagee. C. mortgagor. D. seller.

B. The lender requires insurance only to protect itself, the mortgagee. It may be advisable, or even customary, for insurance to be purchased for the borrower (the mortgagor), but usually it is not required.

Title insurance protects policyholders from all of the following defects EXCEPT A. a forged deed. B. an unrecorded lien that the buyer knew about. C. improper deeds. D. mistakes in the public records.

B. Title insurance does not cover known defects.

Which is NOT a type of judicial deed? A. executor's deed B. guardian's deed C. quitclaim deed D. sheriff's deed

C. A judicial deed is one in which a court orders an official to execute a deed. Examples include administrator's or executor's deeds, guardian's deeds, and sheriff's deeds. A quitclaim deed is not a judicial deed.

Mike bought property at a foreclosure sale. Which deed was he LEAST LIKELY to have received in the transfer? A. bargain and sale deed B. judicial deed C. limited warranty deed D. sheriff's deed

C. A sheriff's deed, a type of judicial deed, or a bargain and sale deed, which has no warranty at all, are typically used. Of these options, a limited warranty deed would be the least likely to be used in a foreclosure sale.

A title examiner tries to establish the present owner of a certain property by reviewing all the previous deeds of the previous owners he can find. The title examiner is trying to establish A. abstract of title. B. certificate of sale. C. chain of title. D. opinion of title.

C. A string of successive conveyances from one owner to the next owner arranged consecutively from the first recorded owner of the property to the current owner is called a chain of title.

Melissa went to the dry cleaners and dropped off her good wool coat to be cleaned. When the clerk accepted the coat, Melissa and the dry cleaning operation had just entered into what type of contract? A. complete B. express C. implied D. unilateral

C. An implied contract is one that has not been put into words, but the terms of which are implied by the actions of the parties. Melissa expects her coat to be professionally cleaned in a timely manner and the drycleaners expect to be paid for their services.

Carrie, age 17, is selling the house that she inherited from her grandparents. George has agreed to buy the property, and both have signed a purchase agreement. What is the status of this contract? A. valid B. void C. voidable by Carrie D. voidable by George

C. Because Carrie is not of legal age, she can back out of the deal; however, George can't.

Carter tells Terry that he would like to buy his house some day. He pays him $5,000 to have a right of first refusal to buy the house whenever Terry decides to sell it. When will Carter get the opportunity to purchase Terry's house? A. as soon as Terry decides to put it up for sale B. when Terry dies C. when Terry gets an acceptable offer from another prospective buyer D. within the timeframe established in the agreement

C. Carter cannot exercise the right of first refusal until Terry gets a bona fide offer from a third party.

The public records would be LEAST LIKELY to reveal what about a specific parcel of land? A. a discharged mortgage B. an easement in gross C. an encroachment D. a pending lawsuit

C. Encroachments are generally discovered through a survey of the property, while the other information would likely be available in the public records.

Which of the following is NOT an example of the involuntary transfer of real estate? A. adverse possession B. eminent domain C. gift D. mortgage foreclosure

C. Gift and sale of property are the most common ways title is transferred by voluntary alienation.

A contract is entered into on fraudulent terms introduced by the seller. Upon discovery of the fraud by the buyer, the contract would be A. valid. B. void. C. voidable by the buyer. D. voidable by the seller.

C. In cases of fraud against the buyer of real estate, the buyer may affirm or disaffirm the contract within a reasonable time after the truth is discovered. The contract would be voidable by the buyer until he or she disaffirmed it; then the contract would be void. If the buyer affirmed the contract, then it would be valid.

Jim made an earnest money deposit of $8,000 when entering into a contract to buy Allen's house. The contract indicated that the injured party would get the earnest money in the event of a breach. Before closing, Jim backs out of the contract, citing health issues, and Allen gets a check for $8,000. This is an example of A. compensatory damages. B. consideration. C. liquidated damages. D. novation.

C. In purchase contracts, there's often a clause calling for forfeiture of the earnest money deposit to the seller if the buyer breaches. This is an example of a liquidated damages provision.

Jared granted a deed to the local school district for 10 feet of land for a walkway easement beside his house to the elementary school. This property was transferred by A. adverse possession. B. condemnation. C. dedication. D. eminent domain.

C. Jared voluntarily transferred private property for public use, so this is alienation by dedication.

Martha signs a lease for one year and agrees to pay $1,200 a month. She moves in April, 2007. After eight months, Martha stops paying rent but doesn't move out. What is this? A. estate for years B. estate from year to year C. tenancy at sufferance D. tenancy at will

C. Martha rented the house, an estate for years, since there is a specific termination date to the lease. However, when Martha stopped paying rent, it became a tenancy at sufferance since she was no longer fulfilling her end of the contract - to continue paying rent for a year at the specified amount.

Lyle leases his property to Shawn. Lyle is the _________ and Shawn is the __________. A. landlord / lessor. B. lessee / lessor. C. lessor / lessee. D. tenant / landlord.

C. One who leases his property is called the lessor or the landlord. A lessee or tenant is the person who rents the property.

A deed contains a guarantee that the buyer will not be bothered by others claiming title to the property. This is example of which covenant? A. against encumbrances B. further assurance C. quiet enjoyment D. seizen

C. Quiet enjoyment does guarantee that the buyer won't be bothered by others claiming title.

Jess has a one-year lease on office space. Her husband is transferred, and she has to move six months into the lease. She assigns the lease to Owen. When Owen does not pay the rent, who can the landlord go after? A. Jess only B. Owen only C. Owen first, then Jess D. both Owen and Jess equally

C. The assignor, Jess, remains secondarily liable in addition to the assignee, Owen. She can be sued if Owen doesn't perform by paying the rent.

Harvey agrees to sell his house to Stuart. They sign a contract. Harvey changes his mind. Which option is NOT possible for Stuart to pursue? A. filing suit to force Harvey to sell the house B. recovering the earnest money as liquidated damages C. requiring that Harvey find him a comparable property D. suing Harvey for compensatory damages

C. The buyer may choose to file a court suit for specific performance and/or sue the seller for damages, but cannot simply require that the seller perform a service such as this.

Shirley was under psychiatric care and declared incompetent in March. She signed a purchase contract to buy Joe's house two months later. What was the status of the contract when she signed? A. unenforceable B. valid C. void D. voidable

C. The contract is void because Shirley did not have capacity at the time she signed.

Something of value given to another to compensate them for entering into a contract is termed A. chattel. B. commingling. C. consideration. D. cooperation.

C. The essential elements of a contract include consideration. Commingling refers to the mixing of funds held in trust with other funds. Chattel is tangible personal property other than real property.

A statement that follows the words of conveyance in a deed that includes "to have and to hold" is called the A. accord and satisfaction. B. granting clause. C. habendum clause. D. recital.

C. The habendum clause describes the type of estate granted, and follows the granting clause, or words of conveyance.

Ruth is disappointed when her 21-year-old daughter Beth drops out of college. She and Beth sign a contract that states Beth promises to go back to school and graduate, and in exchange, Ruth will give her a new SUV on the day she gets her diploma. This contract is best described as A. bilateral and valid. B. bilateral and voidable. C. unilateral and valid. D. unilateral and void.

C. There's nothing to suggest that the contract would not be valid. It's unilateral because it's simply an inducement to get Beth back in school. The contract does not require Beth to graduate, but she would have to graduate before Ruth's promise is binding.

Martin promises to pay Fred $10,000 to set fire to Martin's house so he can collect the insurance. Fred agrees and they shake on the deal. This oral contact could be described as A. invalid. B. valid. C. void. D. voidable.

C. This contract is for an illegal action, therefore, it is void.

Clark is being transferred. Using the ABC Realty website to look at photos of listed houses, he makes an offer on one. The seller accepts and settlement is handled with a long distance conference call. When Clark arrives at the house, nothing looks familiar. ABC determines that their website was linking to a different house. This contract can be nullified because of A. duress. B. fraud. C. misrepresentation. D. undue influence.

C. This is an example of misrepresentation, which is an accidental or negligent misstatement of fact.

Transfer tax in Illinois is based on the A. mortgage amount. B. property's appraised value. C. property's purchase price. D. seller's capital gain.

C. Transfer taxi is based on the sales price.

A subdivision developer employs agent Sue to sell lots. John offers to buy lot B-3 for $20,000, and the sales contract is executed. However, through a typographical error, which no one noticed, the contract identified the lot as D-3 (which was listed at $25,000.) What is the contract status? A. enforceable B. unenforceable C. void D. voidable

D. A mistake that is mutual, material, unintentional, and free from negligence may cause the contract to be voidable, in this case by the developer, though he may decide to honor the deal.

Margaret Jones buys a house. She gets married and is now Margaret Smith. When she sells the house, the grantor name on the deed is Margaret Smith. To clear the cloud on the title caused by having a different name on the deed used to convey her property to someone else, Margaret can file a A. bargain and sale deed. B. general warranty deed. C. grant deed. D. quitclaim deed.

D. A quitclaim deed can be used to correct this break in the chain of title. A correction deed or a deed of confirmation might also be used.

Larry bought a house at a foreclosure sale. What type of deed was he given? A. deed of trust B. deed in lieu of foreclosure C. grant deed D. sheriff's deed

D. A sheriff's deed, sometimes called a referee's deed, would be used to convey title to a property sold due to foreclosure.

During a person's lifetime, title to real estate may be transferred by which method? A. descent B. devise C. escheat D. involuntary alienation

D. Descent, devise, and escheat are all related to someone's estate after death.

1. Greg signs a piece of paper promising to paint Kim's house. This is A. an express bilateral contract. B. an express unilateral contract. C. an implied bilateral contract. D. not a contract.

D. If Kim does not offer something in return for Greg's promise to paint the house, this is not a contract.

Jim bought a house in Illinois for $100,000. How much state realty transfer tax will he be assessed? A. $150 B. $750 C. The amount varies from county to county, and from town to town. D. None, the seller pays the transfer tax.

D. In Illinois, the seller - not the buyer - would pay the $150 transfer tax on the purchase price of $100,000.