Contracts Quiz

The purpose of the statute of frauds is to 1.require certain conveyance-related contracts to be in writing. 2.invalidate certain oral contracts. 3.eliminate fraud in real estate contracts. 4.nullify oral leases and listing agreements.

1) require certain conveyance-related contracts to be in writing (to be enforceable).

If a person obtains a contract while under duress, that contract is 1.Voidable 2.Valid 3.Enforceable 4.Void

1) Gun to your head analogy. You don't have to put a gun to my head, I might like the option to buy still even if I'm under duress.

Which of the following is true regarding the legal nature of option contracts? 1.They give the optionee an equitable interest in the property. 2.They are enforceable, whether written or oral. 3.They must be recorded to be valid. 4.They are not assignable.

1.They give the optionee an equitable interest in the property.

A prospective homebuyer submits a signed offer to buy a house with the condition that the seller pays financing points at closing. The seller disagrees, crosses out the points clause, then signs and returns the document to the buyer. At this point, assuming all other contract validity items are in order, the status of the offer is 1.a counteroffer. 2.an invalid offer. 3.an accepted offer, therefore a valid contract. 4.an invalid contract.

1.a counteroffer.

A good example of a unilateral contract is 1.an option to purchase. 2.a listing agreement. 3.a sale contract. 4.a personal services agreement.

1.an option to purchase.

The guardian for a mentally incompetent party enters into an oral contract with another party to buy a trade fixture. This contract 1.is possibly valid and enforceable. 2.must be in writing to be valid 3.is valid but unenforceable. 4.does not meet validity requirements.

1.is possibly valid and enforceable.

contract based on an illegal consideration is: 1.Valid 2.Void 3.Voidable 4.Enforceable

2. Void

An unscrupulous investor completes a contract with a buyer to sell a property the investor does not own. The sale contract for this transaction 1.is illegal yet potentially enforceable. 2.is void. 3.must be in writing. 4.is voidable.

2.is void.

A contract is discharged whenever 1.the parties agree to their respective promises. 2.it is performed. 3.both parties have signed it. 4.there is a cooling period.

2.it is performed.

As part of a construction contract between a contractor and a buyer, the contractor promises to complete construction by November 20. This promise can be construed as 1.competency on behalf of the contractor. 2.valuable consideration. 3.good faith. 4.mutual consent.

2.valuable consideration.

A homeowner encourages an agent to aggressively persuade a buyer to purchase his house by overinflating historical appreciation rates. The agent and the seller agree that 25% annual appreciation would work, even though this figure is four times actual rates. The pitch succeeds, and the seller accepts the buyer's resulting offer. This contract is 1.enforceable. 2.voidable. 3.void. 4.valid.

2.voidable. Voidable. A voidable contract is one which initially appears to be valid but is subject to rescission by a party to the contract who is deemed to have acted under some kind of disability. Only the party who claims the disability may rescind the legal effect of the contract. For example, a party who was the victim of duress, coercion, or fraud in the creation of a contract, and can prove it, may disaffirm the contract. However, the disaffirmation must occur within a legal time frame for the act of rescission to be valid. Similarly, if the party who has cause to disaffirm the contract elects instead to perform it, the contract is no longer voidable but valid. A voidable contract differs from a void contract in that the latter does not require an act of disaffirmation to render it unenforceable.

A buyer submits an offer to a seller. Two hours later, the buyer finds a better house, calls the first seller and withdraws the offer. Which of the following is true? 1.The offer becomes an executory contract. 2.The offer becomes a counteroffer. 3.The original offer is legally extinguished. 4.The offer has been rejected.

3) The original offer is legally extinguished. Withdrawn before acceptance.

What is the term when an old contract is replaced by a new one? 1.Estate 2.Abstract 3.Novation 4.Amendment

3) Novation Novation = latin for new Novation is a term used to describe the act of either replacing a contract obligation to perform with a new obligation or by replacing a party to an agreement with a new party. Examples of contracts discharged by novation are mortgages and negotiable instruments. It's not possible to novate part of a contract, as a novation necessarily involves extinguishing the original agreement. ... A new contract between the continuing party and the new third party dealing with the transferred part of the original contract.

A seller immediately accepts a buyer's offer but waits eight days before returning the accepted document to the buyer. Meanwhile, the offer has expired. Which of the following is true? 1.The buyer may not rescind the expired offer. 2.The seller may sue for specific performance. 3.The buyer has no obligations to the seller whatsoever. 4.The buyer is bound to the contract since it was accepted immediately.

3.The buyer has no obligations to the seller whatsoever.

According to contract law, every valid contract is also 1.void. 2.enforceable. 3.enforceable or unenforceable. 4.voidable.

3.enforceable or unenforceable.

The statute of limitations requires that parties to a contract who have been damaged or who question the contract's provisions 1.must select a specific, limited course of action for recouping their losses. 2.must wait a statutory period before they may take legal action. 3.must act within a statutory period. 4.must arbitrate prior to taking court action.

3.must act within a statutory period.

A landlord suddenly terminates a tenant's lease in violation of the lease terms. The tenant takes action to compel the landlord to comply with the violated terms. This is an example of a suit for 1.rescission. 2.forfeiture. 3.specific performance. 4.damages.

3.specific performance.

A due-on-sale clause in a sale contract puts parties on notice that 1.all of the seller's debts must be retired before or upon closing. 2.any loans surviving closing become immediately payable. 3.third-party loans surviving closing may be accelerated by the lender. 4.the full price of the property is due the seller at closing.

3.third-party loans surviving closing may be accelerated by the lender.

A broker has a right to a commission on the basis of negotiations which she completes during the term of the listing agreement, unless: 1.The seller dies after the closing. 2.She files a lawsuit against her principal. 3.The listing agreement includes a liquidating damages clause. 4.A protection period clause is included in the agreement.

4) Period Clause is included in the agreement. A Protection Period Clause in a listing will allow a Broker to collect a commission for a specified period of time after the term of the listing has expired. If you look at a listing agreement, you'll see the paragraph where you'll need to indicate the period of time after the listing expires the broker is entitled to a commission. If the broker procured a buyer during the period their listing agreement, they must have the names of the buyers in writing to receive a commission if that buyer purchased during this period. It doesn't matter if the seller dies after the closing because the deal is completed and the property has already been conveyed to the buyer. It's not likely you studied the term liquidating damages in any real estate salesperson course. Therefore, you shouldn't choose any answer that includes a subject matter that you haven't studied; it's not likely it will be the correct answer. Filing a lawsuit against the principal is not the answer.

Which of the following contracts must be in writing to be enforceable? 1.A six-month lease. 2.An executory contract. 3.A parole contract. 4.A two-year lease.

4.A two-year lease.