Unit 9: Basic Contract Law

A real estate contract with a minor is A) voidable. B) illegal. C) unilateral. D) void.

A) voidable.

All of the following are essential to the validity of a purchase contract EXCEPT A) earnest money in good funds. B) lawful objective. C) consideration in money, promises, or something of value. D) communication of acceptance to the offeror.

A) earnest money in good funds.

A real estate license gives the broker the right to A) fill in the blanks on pre-printed standard forms. B) act as a principal to the contract. C) draft offers to purchase for a client. D) perform as a notary public.

A) fill in the blanks on pre-printed standard forms.

In a standard sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to A) have both parties initial or sign and date in the margin near each change. B) redraw the entire contract. C) write a letter to each party listing the changes. D) have each party write a letter to the other approving the changes.

A) have both parties initial or sign and date in the margin near each change.

All of the following are essential elements of a contract EXCEPT A) rescission. B) a lawful objective. C) mutual agreement. D) consideration.

A) rescission.

In an auction, when the seller accepts any bid at any auction, no matter what type, the property is A) sold. B) foreclosed. C) pending. D) in transition.

A) sold.

A written real estate contract is presumed to be the complete agreement of the parties to a contract because of A) the parol evidence rule. B) the statute of limitations. C) the doctrine of caveat emptor. D) the statute of frauds.

A) the parol evidence rule.

A contract has been completed with all signatures provided. A buyer asks for a change to one piece of information in the contract and the seller verbally agrees. Who must sign off on this change? A) The seller B) Both parties who originally executed the contract C) The seller's real estate agent D) The buyer

B) Both parties who originally executed the contract

Which of the following gives the BEST evidence of the buyer's intention to carry out the terms of the real estate purchase contract? A) The agreement to seek mortgage financing B) The earnest money deposit C) The "subject to" clause D) The provision that "time is of the essence"

B) The earnest money deposit

The buyer has requested that an item of personal property be included in the sale, and the seller orally agreed to include it. The buyer agent forgets to add the item to the offer and does not review the offer with the buyer. The omission is not discovered until closing, and the seller refuses to leave it. In this instance, which is FALSE? A) The buyer's agent may have to buy the item and could be disciplined for lack of competency. B) The item must be left with the property because personal property conveys unless excluded. C) The broker should have included the personal property in the offer. D) The seller is not bound by the oral agreement to include the object because it was not included in the written contract.

B) The item must be left with the property because personal property conveys unless excluded.

A buyer and a seller enter into a purchase contract for a vacant lot by writing the terms of the purchase on notebook paper. They both sign the paper. The paper is A) an option to purchase that becomes a bilateral contract at the time it is transferred to a proper contract form. B) a binding executory purchase contract. C) an illegal but binding contract if both parties close and the deed is passed. D) an illegal contract because it is not an approved form.

B) a binding executory purchase contract.

In an auction without reserve, the seller agrees to accept the high bid, no matter what the terms of that bid are. In North Carolina, this is also called A) a no fail auction. B) an absolute auction. C) a drop dead auction. D) an auction of finality.

B) an absolute auction.

There are two types of real estate auctions. In one, the seller has the right to stop the bidding if it becomes apparent that the high bid will be unacceptable, or too low, to the seller. This is A) an auction in abstention. B) an auction with reserve. C) an auction with safe stop. D) an auction bait and switch.

B) an auction with reserve.

A broker is permitted to fill in the blanks on certain approved preprinted documents (such as sales contracts and leases) when authorized to do so by the parties, provided the broker A) has a lawyer present at the time B) does not charge a separate fee for completing the forms. C) charges a fee for filling out forms. D) has the client fill in the blanks at the brokers' direction.

B) does not charge a separate fee for completing the forms.

If text in a preprinted contract is not applicable to the transaction the broker is performing, the broker should A) draft a contract without the words. B) rule out the unwanted words with a line through them. C) inform the client they may not proceed with the transaction. D) find a contract that doesn't have those words.

B) rule out the unwanted words with a line through them.

The typical real estate agent or broker rarely has the ability to accept an offer in place of A) the bank. B) the seller. C) the title company D) the brokerage.

B) the seller.

When preparing documents for a sales transaction, if there are no available standard or preprinted forms drafted by a North Carolina attorney, then the broker should refer the parties to A) an office supply store. B) the Real Estate Commission. C) an attorney. D) another broker.

C) an attorney.

If a real estate client directs a broker to draft contract language, the broker A) requests his licensed assistant to do this. B) is able to have the client sign a waiver so the broker may do this. C) is prohibited from doing so. D) is empowered to draft documents.

C) is prohibited from doing so.

According to the statute of frauds, a contract for the sale of real estate, a long-term option, and a four-year commercial lease A) must be in writing to be legally binding. B) needs to be written and signed within appropriate time frames to be legal and enforceable. C) must be in writing to be enforceable. D) should be executed within a certain time or it will automatically expire.

C) must be in writing to be enforceable.

A buyer makes an offer to a seller. The seller in this transaction would be described as the A) minor. B) assignee. C) offeree. D) grantee.

C) offeree.

A licensed real estate broker is NOT authorized to A) write appropriate language on preprinted forms. B) fill in blanks on addenda. C) practice law. D) provide lines for clients to initial in margins of documents.

C) practice law.

Brokers are permitted to use electronic, computer, or word-processing equipment to store preprinted approved forms. Stored forms may not be altered in any way before the form is presented to A) the printer queue. B) the appraiser. C) the parties to the contract. D) the closer.

C) the parties to the contract.

A contract that exchanges a promise for performance is A) implied. B) bilateral. C) unilateral. D) executory.

C) unilateral.

Linda and John are attending an auction to purchase 35 acres of farmland. They were the high bidders, even though their bid was very low. The type of auction Linda and John attended was an auction A) run by an online auction service. B) without a licensed auctioneer. C) without reserve. D) without a licensed listing broker in attendance.

C) without reserve.

What is the major difference between bilateral and unilateral contracts? A) The number of parties for each contract. B) Earnest money is consideration in a unilateral contract but not needed in a bilateral contract. C) Bilateral contracts are binding; unilateral contracts are not. D) The obligations of the parties to the contracts.

D) The obligations of the parties to the contracts.

The essential elements of any type of contract include all of the following EXCEPT A) competent parties. B) offer and acceptance. C) legal consideration. D) agency disclosure.

D) agency disclosure.

If, upon the receipt of an offer to purchase a property subject to certain conditions, the seller makes a counteroffer, the prospective buyer is A) bound by whichever offer is lower. B) bound to accept the counteroffer. C) bound by the original offer. D) relieved of the original offer.

D) relieved of the original offer.

When the seller accepts any bid at any auction, no matter what type, the property is sold. In an absolute auction in North Carolina, no matter what the terms, the seller agrees to accept A) the wire transfer offer only. B) the first offer. C) the cash offer only. D) the highest offer.

D) the highest offer.