Red Real Estate Dynamics Chapter 8

Front 1

Chap 8, ques 1
Smith enters into a contract with Jones. Unknown to Smith, Jones has previously been judicially determined of unsound mind. Under these conditions, the contract is:
A: valid
B: void
C: voidable
D: unenforceable

Back 1

B: void

Front 2

Chap 8, ques 2
A broker holding and earnest money deposit:
A: Holds the money to guarantee commision
B: is a trustee of the principal
C: must refund to the purchaser on demand
D: may keep the money in a personal checking account

Back 2

B: is a trustee of the principal

Front 3

Chap 8, ques 3
Acceptance of an offer will not create a binding contract if acceptance is:
A: Absolute
B: complete
C: unconditional
D: qualified

Back 3

D: qualified

Front 4

Chap 8, ques 4
Mr and Mrs Brown want to have the house Mrs. Richardson is selling, but the Browns might have trouble getting a convenient mortgage loan because they have just started a new business. The parties agree to enter into a five year land contract (installment sale). Which is true?
A: the Browns will now own the property. Mrs Richardson will recieve monthly payments and the balance of the sale price in five years
B:Mrs Richardson will be the landlady and the Browns will move in as tenants.
C: The Browns will not be able to occupy the property until five years have passed.
D: The land contract allows the Browns occupancy and also equitable title

Back 4

D: The land contract allows the Browns occupancy and also equitable title.
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chap 8-15
G: Land Contract
A land contract, also known as an installment sale or contract for deed, is an alternative method of financing a home purchase During the period of time selected for this agreement to be in effect, the seller will keep legal title to the property and will remain responsible for payments on any mortgage loans on the property. The buyer will be given occupancy and will make regular payments toward the purchase price to the seller. The buyer is said to have equitable tile, which means the seller will be obligated to convey the full title when the full price has been paid. On the other hand if the buyer defaults the seller does not have to foreclose since he/she still owns the property.

Front 5

Chap 8, ques 5
Contract law requires parties be competent to sign. Which of the follwoing would probably be qualified to sign?
A: A child that has been declared an emancipated minor
B: a women who is being treated for a dependancy of prescription drugs
C: a somewhat confused old lady who is being coaxed by a grandson to sign
D: a laborer who is illiterate and wants to sign with an X

Back 5

D: A laborer who is illiterate and wants to sign with an X

Front 6

Smith is trying to sell a property to Jones for 50,000.
Jones is anxious to buy but unsure about whether he can raise the money. Therefore he pays Smith $500 for a 30 day option. Under such circumstances which is true?
A: If Jones cannot raise the money in 30 days, his $500 will be refunded
B: If Jones does raise the money he needs, Smith must sell and the price is not negotiable
C: If Smith recieves another offer for the $50,000, he can revoke the option and refund the $500 to Jones
D: If Smith does buy the property the $500 will automatically be applied to the purchace price he has to pay at the closing

Back 6

B: If Jones can raise the money he needs, Smith must sell and the price is not negotiable.
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C: Option Contracts
An option contract is a unilateral contract in which the property owner (the optionor) agrees to give a perspective buyer or lessee (the optionee) the right to buy or lease the property for a certain price and within a certain time limit. For this contract to be enforceable it must be in writing, signed by the optionor and valuable consideration must be provided. If during the time period the optionee chooses to buy at the price and terms contained in the agreement, the optionor is bound to comply.

Front 7

Chap 8, ques 7
Johnson made an offer to Quick to purchase Quick's land. Quick accepted the offer but died before notifying Johnson. Under these circumstances Johnson:
A: May enforce the contract
B: is protected by the statute of frauds.
C: is protected by supervening illegality
D: will have to renegotiate with Quick's heirs

Back 7

D: will have to renegotiate with Quick's heirs

Front 8

Chap 8, ques 8
After the signing of a valid sales contract, purchaser, Bob Clark dicovered the land he was buying had no oil underneath it as he had thought. He may:
A: rescind because of his mistake
B: have to complete the transaction
C: sue for damages
D: make a counter offer to the seller

Back 8

B: Have to complete the transaction

Front 9

Chap 8, ques 9
In listing a property, a licensed salesperson is told by the seller that the air condition system is no longer working and must be replaced. When a buyer prospect becomes interested in the property, the salesperson failes to mention that problem. This behavior constitutes:
A: negligent misrepresentation
B: actual fraud
C: constructive fraud
D: negative fraud

Back 9

D: negative fraud
====================
chap 8-6
2. Fraud
The defination of fraud also includes concealment of important information. This is called negative fraud. For example, a licensed salesperson is told by the seller that the air condition system is no longer working and must be replaced. When a buyer prospect becomes interested in the property, the salesperson failes to mention that problem.

Front 10

Chap 8 ques 10
Ben and Will are both mistaken as to the parcel of land which Ben is buying from Will. Under these circumstances:
A: they each have a voidable contract
B: There is no contract
C: They each have an unenforcebale contract
D: each is technically guilty of constructive fraud against the other.

Back 10

B: There is no contract
===================
chap 8-6
In this case there is no mutuality. Had the seller not been certain of the parcel and
there is no intent to decieve or mislead the other party, but material facts are nevertheless misrepresented, the act is called contructive fraud, also called negligent misrepresentation.

Front 11

Chap 8 ques 11
The Larsons are being transfered to another city. They have reached a binding agreement for the sale of their condominium to Jennifer. Three weeks before the closing they learn that the job transfer has been cancelled and ask their agent to let Jennifer know they no longer intend to sell. Which of the following is true?
A. The lawsons are not in default since thier change of plans was not something they caused.
B. If Jennifer still wants this condominium, she should sue the Lawsons for damages
C: If Jennifer agrees to recission she gets her earnest money back, but the listing broker is no longer entitles to a commision
D: The Lawsons might be forced to sell if Jennifer sues for specific performance

Back 11

D: The Lawsons might be forced to sell if Jennifer sues for specific performance.
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chap 8 - 13
2. Specific Performance
In a default the innocent party may seek a court order requiring the defaulting party to carry out the precise terms and conditions of the contract. Some states limit this right to buyers only, based on the fact that real property is a unique item. No amount of monetary damages will allow the buyer to have something exactly like the parcel for which he had contracted. The seller on the other hand was to recieve money and money is not unique.

Front 12

chap 8 ques 12
Which of the following would NOT be sufficient to support consideration in a sales contract?
A: Money
B: Property
C: Service
D: Love and affection

Back 12

D: Love and affection
====================
chap 8-7
D: Consideration
In addition to competent parties and mutual assent, a contract is valid and enforceable only if supported by a consideration. This is the money or something of value - be it cash, a check, a promissory note, labor, proprty, promises, merchandise, etc - that will be exchanged.
If the promise is money or anything of value ssuch as services, property, or the promise not to act (forbear), the contract is supported by valuable consideration. A gift deed might state that a property is being exchanged for "love and affection." This is good consideration.

Front 13

chap 8 - 13
Oral contracts for the sale of real property may be valid but they are unenforceable because of:
A: the law of agency
B: the statute of limitations
C: the statute of frauds
D: the doctrine of laches

Back 13

C: The statute of frauds

Front 14

chap 8 ques 14
Which of the following actions is (are) most likely to result in constructive fraud
A: Broker Jones conceals from buyer Smith the fact that the roof leaks
B: Broker Jones tells buyer Smith the plumbing works when Broker Jones knows it does not.
C: Broker Jones thinks property values in the area have gone up 20% in the last year and so informs buyer Smith when careful examination of records would have shown a 5% increase.
D: Broker Jones suggests to Buyer Smith that a duplex will rent for $350 per unit. when Jones actually thinks it tops $250.

Back 14

C: Broker Jones thinks property values in the area have gone up 20% in the last year and so informs buyer Smith when careful examination of records would have shown a 5% increase.
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chap 8-6
If there is no intent to decieve or mislead the other party, but material facts are nevertheless misrepresented, the act is called constructive fraud, also called negligent misrepresentation.

Front 15

chap 8 ques 15
Smith enters into a contract with Jones to buy Jones' land. Before closing, Smith changes her mind. Brown, an aquaintenance of Smith says he would like to buy the land, so Smith transfers her rights and obligations under the contract to Brown. Smith's actions are:
A: Legal if not restricted by the contract
B: illegal whether mentioned in the contract or not
C: a novation
D: a breach of contract

Back 15

A: legal if not restricted by the contract
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chap 8-11
G. Assignment of a contract
Assignment is the transfer of ones rights and obligations under a contract to another party. Unless there is a specific restriction in the contract, rights and obligations are transferable. For a purchaser who has a change of mind about buying, this is one way to get out of it short of defaulting, if someone can be found who wants to take over.

Front 16

chap 8 ques 16
A bilateral contract is one:
A: where one party agrees to perform
B: where one party is given an option to perform
C: where a promise by one party is given in exchange for a promise by another party
D: which applies only to leases

Back 16

C: where a promise by one party is given in exchange for a promise by another party
======================
chap 8-3
G: Bilateral or Unilateral
In a bilateral contract both parties make promises and therefore incur obligations. For each promise there is a benefit recieved and a detriment suffered.

Front 17

chap 8 ques 17
Undue influence or duress applied to one party to a contract makes the contract:
A: Void
B: Voidable
C: invalid
D: unenforceable

Back 17

B: Voidable
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chap 8-7
4. Duress or Menace
There is mutual assent to a contract only when the parties have entered into it freely and voluntarily. Anyone who has been forced to sign (duress) or has been coerced into signing by threat of force (menace) has the right to rescind
5: Undue Influence
There might be no mutual assent if someone is influenced into signing a contract by another person due to a relationship of trust and confidence that existed between them. Such contracts are voidable
===
chap 8 - 2
D: Voidable
A voidable contract is one that either or possibly both parties might rescind or disaffirm but until that happens the contract is valid.

Front 18

chap 8 - 18
In order for a real estate purchase and Sale agreement to be a valid contract, it must include:
A: A provision of earnest money of at least one dollar
B: a complete legal property description
C: a list of all liens and encumberances
D: a financing contingency

Back 18

B: a complete legal property description
=====================
chap 1 - A sales contract or lease without a valid legal description is not enforceable

Front 19

chap 8 - 19
Robert made an offer to Dan who immediately made a counter offer. Which of the following statements is false?
A: Dan's counter offer was a qualified acceptance
B: Robert may make yet another offer to Dan
C: Robert may call the whole thing off without penalty
D: If Robert refuses the counter offe, then Dan may accept the original offer and bind Dan to the contract

Back 19

D: If Robert refuses the counter offer, then Dan may accept the original offer and bind Dan to the contract.

Front 20

Chap 8 ques 20
Jane, who is seventeen years old, enters into a contract to buy George's Home. The contract is:
A: valid
B: void
C: voidable
D: unenforceable

Back 20

C: voidable
================
chap 8-3
A contract signed by a minor is voidable at the minors option

Front 21

chap 8 ques 21
Between the signing of the contract and the closing the contract is:
A: intoxicated
B: executory
C: menacing
D: illegal

Back 21

B: executory
=================
chap 8-2
F. Executory and executed
An executory contract is one in which one or both parties have not yet performed.

Front 22

Chap 8 - 22
When a corporation contracts to buy property, the contract is signed by:
A: the attorney
B: the designated officers
C: the board of directors
D: the mentally incompetent

Back 22

B: the designated officers
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chap 8-4
With a corporate resolution the board authorizes certain officials to sign and to bind the corporation in contract matters

Front 23

chap 8 ques 23
The phrase "time is of the essense" in the contract means:
A: The contract is executed
B: the parties have reasonable leeway
C: each party gets one time out
D: time limits must be strictly observed

Back 23

D: time limits must be strictly observed
==========
chap 8-10
A properly drawn contract will specify time limits within which parties. Prepared forms will usually also contain the phrase "time is of the essense" This phrase means all time limits in the contract be strictly observed - whereas if this phrase were not present, a court, in interpreting this contract, might attribute a reasonable leeway.

Front 24

chap 8 ques 24
All the following will discharge the contractual obligations EXCEPT:
A: Performance
B: destruction
C: agreement
D: statute of limitations

Back 24

D: Statute of limitations
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Performance, destruction and mutual agreement are all reasons to either discharge or the contractual obligations or show them to be complete

Front 25

chap 8 ques 25
If a person who is a minor or mentally incompetent has property to be sold or leased, the contract is signed by:
A: Power of attorney
B: making a mark
C: a gaurdian
D: an agent

Back 25

C: a gaurdian