Psi Ch 9

Front 1

1. A contract in which the intentions of the parties
are shown by their actions is

1. an expressed contract.
2. an implied contract.
3. an executory contract.
4. a bilateral contract.

Back 1

1. (2) An expressed contract would be oral or written. An executory contract is one in which parties to the contract have not fulfilled their contractual obligations. An accepted offer to purchase would be an example of a bilateral contract. (91)

Front 2

2. Which of the following is NOT an essential element of a contract?

1. An earnest money deposit
2. Legality of object
3. Offer and acceptance (mutual assent)
4. Competent parties

Back 2

2. (1) Earnest money can be used as consideration to create a contract, but it is not essential. A contract to purchase a home may be written with the agreement that a check is to be written at closing for the full amount. To create a contract requires consideration, but the consideration may be a promise to pay the full amount at closing in return for the owner's property. (91)

Front 3

3. The lessee in a leasing agreement is the

1. tenant.
2. property manager.
3. landlord.
4. rental agent.

Back 3

3. (1) The landlord is the lessor. A property manager is considered a general agent because of the broad responsibilities assumed on the property owner's behalf. (95)

Front 4

4. A lease that is signed by a person who is 17 years of age (still a minor) is

1. unilateral. 3. illegal.
2. void. 4. voidable.

Back 4

4. (4) A minor may enter into a contract; however, upon reaching majority age the minor may either ratify (accept) or disaffirm (reject) the contract. (92)

Front 5

5. Contracts for sale of real estate must be in writing to be enforceable, according to the

1. statute of limitations.
2. parol evidence rule.
3. statute of frauds.
4. real estate commission.

Back 5

5. (3) The statute of limitations is the period of time within which one may judicially challenge a contract. The real estate commission is a regulatory body that is responsible for enforcing rather than making the laws of a state. The parol evidence rule provides that prior or contemporaneous oral agreements modifying a written contract will not be admitted in a court of law to modify or contradict a written contract. (94)

Front 6

6. A broker lists a home for $80,000. The broker brings an offer to the seller for $78,000, which is rejected by the seller. The broker obtains another offer, for $80,000, for the seller. Before she can deliver the offer, however, the offerer withdraws it by calling the broker at the seller's home. There is

1. an implied contract.
2. a unilateral contract.
3. an executory contract.
4. no contract.

Back 6

6. (4) An offer can be withdrawn at any time prior to notification of acceptance. (91)

Front 7

7. You have entered into an option contract with an optionee who has 30 days to exercise his option. The option is what kind of contract?

1. Voidable contract
2. Unilateral contract
3. Unenforceable contract
4. Bilateral contract

Back 7

7. (2) An option is a unilateral contract until the optionee chooses to exercise the option right to buy, at which time it becomes a bilateral contract. The optionor may not void the contract, which is enforceable by the optionee. (94)

Front 8

8. Which of the following contracts are prohibited or discouraged in most states?

1. Option
2. Land contract
3. Open listing
4. Net listing

Back 8

8. (4) Options and installment land contracts are commonly used; the open listing is generally allowed but used rather infrequently. (92)

Front 9

9. Without discussing price, you order dinner in a restaurant. You are required to pay for the dinner through what kind of contract?

1. Bilateral 3. Voidable
2. Express 4. Implied

Back 9

9. (4) The ordering of the dinner is considered an implied contract. An express contract is one where words have been exchanged, whereas in an implied contract the parties' conduct often demonstrates their willingness to enter into a contract. (91)

Front 10

10. A broker and a seller have signed an open listing contract. This agreement is an example of

1. a unilateral contract.
2. an executed contract.
3. a bilateral contract.
4. an unenforceable contract.

Back 10

10. (1) A bilateral contract would require two promises. An open listing would be enforceable but clearly is not an executed contract as the parties must perform. (92)

Front 11

11. Which of the following correctly describes an open listing?

1. The seller may employ any number of brokers.
2. Only one broker is authorized to act as agent for the seller.
3. The broker is entitled to a commission regardless of who sells the property.
4. The broker's commission is based on the excess over the sales price stated in the listing.

Back 11

11. (1) Answer number 4 would be a net listing while number 2 would be an exclusive agency or exclusive-right-to-sell listing. The seller in an open listing has the right to sell the property herself without paying the listing broker a commission. (92)

Front 12

12. A salesperson obtains a written offer to purchase a home that she has listed for sale. The seller accepts the offer, and the salesperson promptly telephones the purchaser to notify him of the acceptance. Because the purchaser lives in a nearby town, the salesperson informs him that she will deliver a copy of the contract in three days. The salesperson has an enforceable contract when

1. the seller signs the acceptance.
2. the offer to purchase is presented to the seller.
3. the acceptance is telephoned to the salesperson representing the purchaser.
4. a copy of the contract is delivered to the purchaser in three days.

Back 12

12. (4) The contract is not enforceable until binding acceptance occurs, which generally involves the delivery of the signed and accepted contract to the seller or buyer. (94)

Front 13

13. A contract that lacks legal object is considered to be

1. voidable.
2. unenforceable.
3. void.
4. canceled.

Back 13

13. (3) A contract that does not have legal object is void. A voidable contract is valid but may be disaffirmed depending on the parties involved. An enforceable contract is one that meets the test of a valid contract. (91)

Front 14

14. Which of the following might NOT legally terminate a listing with a broker?

1. Bankruptcy of the client
2. Insanity of the broker
3. Inability of the broker to find a buyer within a reasonable amount of time
4. An economic depression

Back 14

14. (4) A listing contract may be terminated by acts of the parties or by operation of law. (93-94)

Front 15

15. A gave an option on her property for 90 days to B and received a cash consideration of $100. B later assigned the option to C for a valuable consideration. Before expiration of the option, A stated that she no longer wanted to sell the property. Which of the following is correct?

1. The option is void, because an option cannot be assigned.
2. The option is not binding on A, for $100 is not sufficient consideration.
3. C would have a good chance in court to compel A to sell to him, if he exercises the option before its expiration date.
4. A can refuse to sell, because the consideration paid by C was not in cash.

Back 15

15. (3) The optionor promises to sell and has no right to cancel; the optionee has the choice of exercising the option right. (94)

Front 16

16. Both the buyer and the seller agree to wait until the broker's exclusive-right-to-sell listing has expired. They then have a third party buy the home. After a short while, the third party conveys ownership to the interested buyer, who was introduced to the owner by the listing broker. In this case,

1. the broker is not entitled to a commission because the listing expired.
2. if the listing broker can prove collusion, he or she may collect a full commission.
3. the broker may sue both the buyer and the seller for the commission.
4. the broker is entitled to his commission because he performed the task for which he
was hired.

Back 16

16. (2) The broker's rights would be based on the broker protection clause. (92)

Front 17

17. Procuring cause would not be required for a broker to receive a commission in a(n)

1. open listing.
2. exclusive-right-to-sell listing.
3. net listing.
4. exclusive agency listing.

Back 17

17. (2) The open and exclusive agency listings allow the sellers to sell the property personally on their own without owing the broker a commission. (92)

Front 18

18. When a broker sold a property, the sales contract contained the following statement: "Buyer to accept property in 'as is' condition." However, both the seller and the broker knew the plumbing was in a major state of disrepair but did not tell the buyer. Would an action for damages against the broker, based on fraud, be successful?

1. No. The "as is" provision in the contract is evidence of a meeting of the minds.
2. No. The contract specifically stated that the property was being sold "as is."
3. Yes. The duty to disclose a material fact cannot be avoided by an "as is" provision.
4. Yes. "As is" refers only to exterior defects.

Back 18

18. (3) The broker is required to disclose any known material fact that might affect the decision of the buyer. In an "as is" contract it is always best to define what is "as is." Is the plumbing in the bathroom "as is"? Or is the wiring in the entire house "as is"? Or is the entire property "as is"? (91)

Front 19

19. A broker brings a seller an offer-to-purchase contract for the listed price of $114,500, with the stipulation that the seller must furnish a title insurance policy to prove marketable title. The seller refuses the offer. The broker

1. can collect full commission because sellers must always provide title insurance.
2. can collect one-half of the commission.
3. can collect nothing.
4. can collect one-half of the first month's mortgage payment.

Back 19

19. (3) The contingency is not consistent with the terms of the listing, thus relieving the seller of the obligation to pay a commission to the broker. (95)

Front 20

20. A seller listed her home with a broker. Shortly thereafter, the seller telephoned the broker and withdrew the exclusive-right-to-sell listing. A week later, she sold the home to her neighbor for a higher price than the price on the listing. In this situation, which of the following is true?

1. The owner has the right to terminate the listing at any time without being liable for monetary damages incurred by the original listing broker.
2. Under an exclusive right-to-sell listing, the broker is not entitled to a commission if the property doesn't sell.
3. The broker is not entitled to a commission because the seller obtained a better price than she would have received through the broker's efforts.
4. If the owner withdrew the listing, after the broker spent money on it, the owner is liable to the broker for damages.

Back 20

20. (4) The sellers have the power to terminate but not necessarily the right, which could result in the seller being liable for damages. The listing is a unilateral contract between the seller and the broker. As such, the broker could hold the seller to the agreed contract and simply withdraw the listing until the agreed time ran out. However, in most cases brokers who agree to termination hold the seller liable for possible marketing expenses. If the broker had a protection clause in the listing contract, the courts would probably award the broker a commission. (92)

Front 21

21. A salesperson for a broker listed an owner's home under an exclusive-right-to-sell listing contract. Which of the following statements correctly describes this situation?

1. The listing belongs to the salesperson.
2. If the principal sells his own house, he will not have to pay a commission.
3. The listing belongs to the broker.
4. The listing belongs to both the salesperson and the broker.

Back 21

21. (3) The salesperson is not a party to the contract. The exclusive right-to-sell provision prevents the seller from being able to avoid paying a commission. (92)

Front 22

22. An owner gives an exclusive-right-to-sell listing to a broker for a six-month period. During the exclusive period, the owner also gives an open listing to another broker who produces a buyer. What is the owner's liability for payment of a commission?

1. Only one commission must be paid, which both brokers share on a 50/50 basis.
2. The owner is liable only to the first broker for the payment of a commission.
3. The owner is liable for payment of a commission to both brokers.
4. The owner is liable only to the second broker for the payment of a commission.

Back 22

22. (3) The first broker is protected under the exclusive-right-to-sell provision; the second broker is entitled under procuring cause. (92)

Front 23

23. A buyer has contracted with a seller to purchase property. The contract was ratified on January 10. The closing was on March 31. What is the status of the contract on April I?

1. Void
2. Anticipatory
3. Executed
4. Executory

Back 23

23. (3) The closing means that the contract is no longer anticipatory or executory. (91)

Front 24

24. An exclusive-right-to-sell contract is a unilateral contract and may be considered

1. a conveyance.
2. an employment contract.
3. an option.
4. a contingency agreement.

Back 24

24. (2) The listing contract is both a unilateral contract and an employment agreement. It is considered a unilateral contract because the seller obligates himself or herself to pay a commission only if a buyer is procured by the broker. However, the broker doesn't promise the seller that emphatically he or she will find a buyer. The broker only promises to try. Therefore, what legally exists is a promise for an act, which is the definition of a unilateral contract. (92)

Front 25

25. A salesperson may

1. receive a commission directly from a principal.
2. can carry out activities in his or her own name.
3. is responsible primarily to the broker under whom she or he is licensed.
4. may place a blind ad.

Back 25

25. (3) The salesperson works for the broker and may not receive commission from anyone other than the broker for whom he or she works. Blind ads are prohibited. (93)

Front 26

26. A buyer's offer requires that the seller pay for a licensed termite inspector to inspect a house. If active infestation exists, the buyer can either agree to have the property treated or walk. This part of an offer is best known as

1. a condition.
2. a contingency.
3. a chattel.
4. a cloud.

Back 26

26. (2) A contingency best describes this situation. Although the offer is conditioned upon the inspection, all of the elements of a contingency exist to make it the best answer. (95)

Front 27

27. An offer is made and presented to a seller for acceptance. After the offer is signed by the seller, it must be delivered to the buyer(s). Which response best describes proper delivery of an offer?

1. The seller's signature on the offer to purchase
2. The buyer's agent's cell phone call to the buyer to say, "Congratulations"
3. The buyer's agent's actual delivery of a copy of the signed agreement to the buyer
4. The buyer's verbal acceptance of the offer over the phone

Back 27

27. (3) Delivery means actual acceptance of the offer; therefore, until the buyer has received either a hand-delivered or faxed copy of the agreement, acceptance hasn't taken place. (91)

Front 28

28. If a buyer offers to purchase a home for $350,000 subject to the sale of the buyer's home, what is the subject to sale called?

1. Contingency
2. Condition
3. Cloud
4. Cancellation

Back 28

28. (1) The subject to sale is called a contingency. (95)

Front 29

29. A tenant decided to purchase a farm on an installment land contract for deed with a ten-year balloon. During the ten years, what kind of title does the vendee have in the farm?

1. Legal
2. Conditional
3. Equitable
4. Substantial

Back 29

29. (3) Equitable title is sometimes referred to as an insurable interest. Legal title is passed ten years later when the deed is transferred to the vendee by the vendor. (94-95)