Chapter 15: Contract Law Overview
The signing of a purchase contract by a buyer sets in motion a series of events leading to a binding contract of sale. Which of the following is NOT true?
A counteroffer is only a temporary rejection and does not destroy the offer.
The signing of a purchase contract by a buyer sets in motion a series of events leading to a binding contract of sale. Which of the following is true?
A. An offer may be accepted. B. An offer may lapse through passage of a period of time. D. An offer may be withdrawn any time before acceptance.
An owner gave an option on the property for 90 days for a cash consideration of $100. The optionee later assigned the option to another party for a valuable consideration. Before expiration of the option, the owner decided not to sell the property and took it off the market. Which of the following is correct?
The assignee would have a good chance in civil court to compel the optionor to sell if the option is exercised before its expiration date. (This is a valid contract and may be exercised by the optionee)
Maudie buys ten acres of land from Peggy, who is a minor. Maudie hires an architect and builds an expensive home on the land. When Peggy achieves her majority, she disaffirms the sale and tenders the full purchase price for the land back to Maudie. Who receives the home and the land?
While some courts may be sympathetic toward Maudie's plight, the general rule is that Peggy would win because the contract for sale of land with a minor is voidable on the part of the minor. (Grantor of deed must be competent)
A valid contract is binding upon all parties
and cannot be nullified by any of the parties.
When the consideration in a contract takes the form of money, it is
valuable consideration.
Generally, if a purchaser has signed a contract under duress, the contract is
voidable by the buyer. (Duress consists of compelling a person, through force or fear, to agree to a contract. As the aggrieved party, the purchaser can rescind the contract.)
Which of the following is not fully competent to contract?
A. A minor. B. An incompetent. C. An inebriate.
The term "valuable consideration" as used in a contract can include which of the following?
A. Anything movable of monetary value. B. Expert services for which a fee could be charged.
The term "consideration" as applied to real estate contracts includes which of the following?
A. Values given, rendering of service, or money. B. Acts done, forbearance of acts, or favors granted. C. Mutual promises.
In order to possess the full capacity to contract, one must
A. be of sound mind. B. have reached the age of majority.
When the consideration in a deed is love, it is said to be
A. good. A good consideration does not require anything of monetary value. However, it may be insufficient in some cases to cause the transfer of title. One giving good consideration cannot enforce a contract if the grantors change their minds.
Simon Simpleton signs a real estate contract without first reading it. This allows him to later break the contract on the basis of
A. mistake. B. ignorance. C. neither A nor B. Once you sign it, you are bound.
A contract may be an agreement
A. to buy a home. B. not to do a certain thing. (By definition, contracts are agreements to do certain things or to refrain from certain action.)
A real estate sales contract, unless otherwise provided,
A. vests equitable title in the buyer at the same time the contract is ratified. B. is merged into a deed at settlement. (Sales contracts transfer equitable title only. They are not instruments of conveyance. Upon settlement, the contract ceases to exist as it is merged into the deed. However, if a sales contract calls for something to be done after closing and delivery of the deed, such as the installation of a sewer system, this requirement will usually survive the deed and be enforceable.)
21. A consideration for a legal contract may take the form of a I. promise not to marry.III. promissory note with interest. II. promise to build a fence.IV. promise to marry.
BOTH. Valuable consideration can only be something of monetary value or services rendered.
A twelve-year-old boy or girl cannot enter into a valid contract because by law a twelve- year-old is
Both a minor and legally incompetent.
A contract entered into by a competent and an incompetent may be dis-affirmed by which of the following?
Incompetent (Minors and inebriates are incompetents but have limited capacity to contract and, under certain conditions, can disaffirm their contracts.)
Snow, a broker, sells a parcel of real estate for Flake, a minor, age 17 years and 10 months. When Flake becomes of age, he disaffirms the contract of sale. The broker demands that Flake pay the commission and, upon Flake's refusal, begins suit for payment. Which of the following statements is correct?
The contract is voidable at Flake's option. (Minor listed with broker, broker cannot collect commission if minor repudiates it)
The term "contractual ability" means which of the following?
The parties to the contract are competent to enter into a valid agreement. (Most adults, including those who are illiterate, have full capacity to enter in to a legally binding contract.)
If a minor becomes a party to a contract, the contract is usually
Voidable: Most contracts entered in to by a minor are generally voidable at the minor's option. A contract with a minor is valid on its face pending affirmation or disaffirmation on the part of the minor.
When an agent accepts a listing on real property and promises to advertise and promote its sale in exchange for the promise of a commission, if successful, there is
a bilateral contract. (promise of one party to another: if you do this i'll give you this)
A contract between a seller and a buyer is a(n)
bilateral contract.
To be binding on the buyer and seller, an agreement for transfer of real property must
contain an offer and acceptance.
A written contract would best be described as a(n)
expressed contract
During the listing period, the broker discovers that a court of law has declared the principal to be mentally incompetent. As far as the listing is concerned, it
is of no value as it is void. (A contract of a person judicially declared insane can never have any effect.)
If a seller makes any alteration in an offer before accepting it, the buyer
is relieved of the original offer. If there are any modifications, purchaser is relieved of original offer.
A voidable contract is one that
is valid and enforceable on its face but may be properly rejected by one of the parties. (A voidable contract is subject to rescission by one of the parties who acted under a disability. Such disability includes being a minor or being under duress or undue influence. It is a contract which may be avoided or adjudged void but which is not, in itself, void. Avoidable contract is one that is able to be voided.)
A contract secured after deliberate misrepresentation by the seller
is voidable by the buyer. (Deliberate misrepresentation in a contract can result in rescission by the innocent party who relied on false statements.)
Broker Sal Manella has found a buyer for Phil Anderer's home. The buyer has entered into a real estate sales contract for the property for $l,000 less than the asking price and has deposited $5,000 earnest money with Broker Manella. Anderer is out of town for the weekend and Manella has been unable to inform him of the signed agreement. At this point, the real estate sales contract is a(n)
offer. It's an OFFER until it's accepted.
A bilateral contract is one in which the
promise of one party is given in exchange for the promise of another.
The absence of duress, menace, and undue influence is a requirement of
reality of consent.
An oral contract for real estate is generally
unenforceable. (Unless required by law, oral contracts can be just as valid as written contracts. Generally, however, real estate contracts, except those for leases of one year or less, must be in writing to be enforceable. )
A seller gave an open listing to several brokers specifically promising that if one of the brokers found a buyer for the seller's real estate, the seller would then be obligated to pay a commission to that broker. This offer by the seller is what type of an agreement.
unilateral.
