RE Ch. 6: Legal Classification of Contracts - Quiz Qs

An executed contract is a contract that is:

A.under jurisdiction of a probate court

B.signed and recorded

C.written or spoken

D.completely performed by both parties

A.under jurisdiction of a probate court

B.signed and recorded

C.written or spoken

D.completely performed by both parties

An executed contract is one that has been fully performed. This is in contrast to an executory contract, which is still in the process of being performed.

A seller signed a listing agreement promising to pay a commission of 5% upon the sale of her house. The broker promised to use due diligence in locating a buyer. This contract would be a:

A.unilateral executory contract

B.unilateral executed contract

C.bilateral executory contract

D.bilateral executed contract

A.unilateral executory contract

B.unilateral executed contract

C.bilateral executory contract

D.bilateral executed contract

This contract is bilateral because both parties have made promises to each other, and executory because it has not yet been fully performed.

A grant deed is executed if it has been:

A.signed by the grantor

B.acknowledged

C.delivered to the grantee

D.recorded

A.signed by the grantor

B.acknowledged

C.delivered to the grantee

D.recorded

Executed has two meanings. When referring to contractual obligations, it means that the contract has been fully performed. When referring to a document, it means that the document has been signed.

A listing agreement, before a buyer is found, is an executory contract.

True

An agreement to sell 500 widgets for $10,000 is a unilateral contract.

False

After the expiration of a 12-month lease, a tenant continues to make rental payments to her landlord, who accepts the payments. The contract they have formed is an implied contract.

True

A borrower has made the last payment on a loan agreement. The loan agreement is now an executed contract.

True

A reward poster is an example of a bilateral contract.

False

An open listing agreement that has been put into writing is an implied contract.

False

A 13-year-old minor owned a lot and asked his uncle to sell the property. The uncle gave a listing to a broker, who then sold the property. This transaction was:

A.valid because the uncle arranged the transaction

B.voidable by the minor

C.void because a minor cannot sign a real estate contract

D.void because of the uncle's involvement

A.valid because the uncle arranged the transaction

B.voidable by the minor

C.void because a minor cannot sign a real estate contract

D.void because of the uncle's involvement

While other types of contracts are voidable by minors, a real estate contract signed by a minor is void at its inception.

At the age of 15, Kearney inherited a property, and he promptly deeded it to a nonprofit organization of which he was a member. The organization recorded the deed. At age 18, Kearney decided that he wanted the property back. How would a court decide this case?

A.Because Kearney waited three years to attempt to rescind the contract, a court would find that the contract had been ratified

B.Kearney was a minor at the time the deed was signed, so the transfer is void

C.Kearney may recover the property if he compensates the organization for the value of the property

D.Kearney may not recover the property because recording provided irrevocable notice of the conveyance

A.Because Kearney waited three years to attempt to rescind the contract, a court would find that the contract had been ratified

B.Kearney was a minor at the time the deed was signed, so the transfer is void

C.Kearney may recover the property if he compensates the organization for the value of the property

D.Kearney may not recover the property because recording provided irrevocable notice of the conveyance

A real estate contract or conveyance entered into by a minor is void. Therefore, Kearney still owns the property and is entitled to get it back from the organization.

A broker arranged a sale of property owned by a young married man. After the deal had closed and escrow was completed, the title company contacted the broker and said that the seller was 17 years old. The deed would be:

A.valid

B.voidable

C.void

D.unenforceable

A.valid

B.voidable

C.void

D.unenforceable

Even though the seller was only 17, he had the legal capacity to convey real estate, because marriage serves to emancipate a minor.

Penny, a 17-year-old divorced woman, approached a broker in order to sell her share of what had been community real property. The broker may:

A.not take her listing without court approval

B.not take her listing without the signature of an attorney-in-fact

C.take her listing and sell according to her instructions

D.take her listing only after she turns 18

A.not take her listing without court approval

B.not take her listing without the signature of an attorney-in-fact

C.take her listing and sell according to her instructions

D.take her listing only after she turns 18

Although Penny is only 17, her marriage served to legally emancipate her, and the fact that she's now divorced doesn't change that. An emancipated minor has the capacity to enter into contracts concerning real estate, so the broker's listing agreement with Penny is valid.

A valid contract requires:

A.an illusory purpose

B.an unlawful objective

C.competent parties

D.oral instructions

A.an illusory purpose

B.an unlawful objective

C.competent parties

D.oral instructions

A.an illusory purpose

B.an unlawful objective

C.competent parties

D.oral instructions

Two parties entered into a contract. One of the parties had previously been adjudged incompetent, but the other party did not know this. The contract is:

A.valid

B.voidable

C.unenforceable

D.void

A.valid

B.voidable

C.unenforceable

D.void

Any contract signed by a person who has been declared incompetent is void, even if there was no coercion and the competent party was unaware of the other party's incompetence.

In which of the following circumstances would a deed always be void?

A.A forged deed in the hands of a bona fide purchaser

B.A deed signed by an incarcerated convict

C.A deed signed by an intoxicated person

D.A deed that is not supported by consideration

A.A forged deed in the hands of a bona fide purchaser

B.A deed signed by an incarcerated convict

C.A deed signed by an intoxicated person

D.A deed that is not supported by consideration

A forged deed is always void, even in the hands of a good faith purchaser. (A convict may convey property unless it would pose a threat to public safety. A deed signed by an intoxicated person may be voidable but not void. A deed does not require any consideration to be valid.)

Which of the following acts may be legally undertaken by a minor or an incompetent person, without court approval?

A.Selling real property through a guardian

B.Encumbering a property through an attorney in fact

C.Acquiring property through gift or inheritance

D.All of the above

A.Selling real property through a guardian

B.Encumbering a property through an attorney in fact

C.Acquiring property through gift or inheritance

D.All of the above

Someone who lacks legal capacity to enter into a contract to purchase property may nonetheless receive title to property through gift or inheritance. Court approval may be required for a transfer through a guardian. A minor or an incompetent person is unable to appoint an agent, which would include an attorney in fact.

A 17-year-old divorced woman may not enter into a contract because she is under the age of majority.

False

A person who is legally emancipated may enter into any type of contract. Marriage serves to legally emancipate a person.

A contract signed by someone who is intoxicated is void.

False

A contract that someone signed while intoxicated may be voidable by that person, but it is not void.

An individual reaches the age of majority when she turns 21.

False

18, not 21

If a minor signs a contract for legal services, the contract is voidable only by the minor, not by the other party.

True

A contract signed by a mentally incompetent person is void, which makes it enforceable only by the incompetent person's court-appointed guardian.

False

For someone to have the legal capacity to enter into a contract, he must have reached the age of majority (or be emancipated) and be mentally competent.

True

In a contract, the meeting of the minds between buyer and seller is evidenced by:

A.consideration

B.acknowledgment

C.performance

D.offer and acceptance

A.consideration

B.acknowledgment

C.performance

D.offer and acceptance

Offer and acceptance demonstrates a meeting of the minds between buyer and seller, indicating that a contract has been formed.

What will bind buyer and seller in an agreement for a transfer of real property?

A.Acknowledgment

B.Recording

C.Title insurance

D.Offer and acceptance

A.Acknowledgment

B.Recording

C.Title insurance

D.Offer and acceptance

A valid and binding contract requires mutual consent (offer and acceptance) as one of the four essential elements.

Before the seller's acceptance of an offer has been communicated to a buyer, the buyer may withdraw the offer:

A.if the offer was not stated to be irrevocable

B.if the offer was not scheduled to remain open until a particular date

C.if the offer was not accompanied by a good faith deposit

D.for any reason

A.if the offer was not stated to be irrevocable

B.if the offer was not scheduled to remain open until a particular date

C.if the offer was not accompanied by a good faith deposit

D.for any reason

Prior to the offeree's acceptance, an offeror may withdraw his offer at any time for any reason.

Which of the following would terminate an offer to purchase a house?

A.Rejection by the offeror

B.Rejection by the offeree

C.Revocation by the offeree

D.Inquiry by the offeree as to whether the offeror will accept different terms

A.Rejection by the offeror

B.Rejection by the offeree

C.Revocation by the offeree

D.Inquiry by the offeree as to whether the offeror will accept different terms

Rejection by the offeree terminates an offer. An offeror cannot reject an offer (he would revoke it), while an offeree cannot revoke an offer (he would reject it). An inquiry as to the offeror's flexibility does not serve as a counteroffer.

A buyer makes and signs a written offer. The seller writes in one small change to the offer and signs it. This document is known as a/an:

A.addendum

B.amendment

C.modification

D.counteroffer

A.addendum

B.amendment

C.modification

D.counteroffer

When a counteroffer is made:

A.the offeree becomes the offeror

B.the offeror is accepting the terms without modification

C.the original offer is amended

D.the offeree can later go back and accept the original offer

A.the offeree becomes the offeror

B.the offeror is accepting the terms without modification

C.the original offer is amended

D.the offeree can later go back and accept the original offer

When a counteroffer is made, the original offer is terminated. The counteroffer is a new offer, and the offeree of the original offer is now the offeror of the counteroffer.

Even if a change is very minor, a counteroffer should be made on a separate form (such as the C.A.R. CO form) because:

A.the separate form is needed for the broker's transaction records, even if it was not needed for validity

B.signatures on the original form are invalidated by handwritten changes

C.a counteroffer is actually a new offer and a separate form is necessary

D.it is vital to have a record that shows at what point a contract was formed

A.the separate form is needed for the broker's transaction records, even if it was not needed for validity

B.signatures on the original form are invalidated by handwritten changes

C.a counteroffer is actually a new offer and a separate form is necessary

D.it is vital to have a record that shows at what point a contract was formed

A counteroffer is a new offer that terminates the original offer, so it is best to use a separate form.

Any of the following will terminate an offer, except:

A.conditional acceptance by the offeree

B.death of the offeror prior to acceptance

C.failure by the offeror to communicate a revocation before an acceptance by the offeree

D.failure by the offeree to communicate acceptance before the deadline for acceptance

A.conditional acceptance by the offeree

B.death of the offeror prior to acceptance

C.failure by the offeror to communicate a revocation before an acceptance by the offeree

D.failure by the offeree to communicate acceptance before the deadline for acceptance

If an offeror wants to revoke her offer but fails to notify the offeree before the offeree communicates acceptance, then the revocation is ineffective and a binding contract is formed.

When does an offer to buy become a binding contract?

A.The instant the offeree decides to accept

B.When the acceptance is communicated to the offeror

C.When the acceptance is communicated to the offeree

D.When all parties' signatures are on the offer

A.The instant the offeree decides to accept

B.When the acceptance is communicated to the offeror

C.When the acceptance is communicated to the offeree

D.When all parties' signatures are on the offer

Acceptance must be communicated by the offeree to the offeror. At that point, a binding contract is formed.

On Thursday, Angie decided to accept Harry's counteroffer for the purchase of his house, signed the purchase agreement, and placed it in the mail. On Friday, Harry decided that he had asked too low a price for the house, and faxed Angie stating that the offer was withdrawn. On Saturday, Harry received her acceptance in the mail. Under the mailbox rule, which of the following is true?

Select your answer below:

A.Harry withdrew his offer, so no contract is formed

B.Harry did not withdraw his counteroffer in time, so a contract is formed

C.Harry may not make a counteroffer

D.Harry's withdrawal was ineffective since it was not in writing

A.Harry withdrew his offer, so no contract is formed

B.Harry did not withdraw his counteroffer in time, so a contract is formed

C.Harry may not make a counteroffer

D.Harry's withdrawal was ineffective since it was not in writing

Angie's acceptance was placed in the mail before Harry communicated his revocation of the counteroffer. Since the mailbox rule applies in California, this means that Angie's acceptance is effective and a binding contract is formed.

Oliver offered to purchase Stan's property. The broker presented the offer to Stan, who accepted it. Before the broker could communicate Stan's acceptance to Oliver, Oliver died suddenly. Which of the following would be true?

A.The acceptance made by Stan to the broker binds Oliver's heirs to the purchase

B.The contract is binding since an offer was accepted

C.Although the offer was accepted, the sale cannot proceed because the deed cannot be delivered

D.Oliver's death terminated the offer before the broker could communicate Stan's acceptance, so no contract is formed

A.The acceptance made by Stan to the broker binds Oliver's heirs to the purchase

B.The contract is binding since an offer was accepted

C.Although the offer was accepted, the sale cannot proceed because the deed cannot be delivered

D.Oliver's death terminated the offer before the broker could communicate Stan's acceptance, so no contract is formed

The death of the offeror before acceptance has been communicated serves to terminate the offer, so the acceptance does not create a binding contract.

An agent promised, while taking a listing, that she would use advance fees from the seller in order to advertise the property. Instead, she used the advance fees to buy cocaine for herself. 😂 This would be an example of:

A.actual fraud

B.constructive fraud

C.fraud in factum

D.negative fraud

A.actual fraud

B.constructive fraud

C.fraud in factum

D.negative fraud

It's actual fraud whenever a person makes a promise without any intention of performing it, in order to deceive another person.

Which of the following would be an example of fraudulent misrepresentation by an agent?

A.A representation that is material and contrary to fact

B.A misrepresentation made with knowledge of the falsehood

C.A misrepresentation that caused a person to enter into a contract

D.All of the above

A.A representation that is material and contrary to fact

B.A misrepresentation made with knowledge of the falsehood

C.A misrepresentation that caused a person to enter into a contract

D.All of the above

Any representation is fraudulent when it contains misinformation and is made to someone who relies on that information.

A landlord requested that one of his tenants, a professional electrician, make repairs on another of the landlord's properties, in exchange for a rent reduction. The tenant kept promising to make the repairs but never followed through. Finally, the landlord got the tenant to enter into a written agreement to make the repairs by threatening the tenant with eviction. The contract is:

A.void

B.valid

C.voidable

D.unilateral

A.void

B.valid

C.voidable

D.unilateral

This is an example of duress, since the landlord used his position of power to force the tenant to enter into a contract involuntarily. This makes the contract voidable by the victimized party.

A contract signed under duress would be:

A.void

B.voidable

C.illegal

D.valid

A.void

B.voidable

C.illegal

D.valid

A contract signed under duress is voidable. This means that the wronged party has the option of rescinding the contract or enforcing the contract against the other party.

A valid contract requires consideration. Which of the following could be consideration?

A.$1 or more

B.Performance of services

C.A promise to give something that the parties consider to be of value

D.All of the above

A.$1 or more

B.Performance of services

C.A promise to give something that the parties consider to be of value

D.All of the above

Consideration may be money, property, services, or a promise to provide something of value in the future.

Which of the following would not be acceptable consideration in a contract?

A.Anything the parties consider of value

B.Illegal substances

C.One dollar or more

D.Performance of services

A.Anything the parties consider of value

B.Illegal substances

C.One dollar or more

D.Performance of services

The object of a contract cannot be unlawful. So, for instance, a contract where illegal substances are the consideration, to be exchanged for money, would be void.

Which of the following is not a necessary element for a valid contract?

A.A legal objective

B.A meeting of the minds

C.Payment of money

D.Capacity of the parties

A.A legal objective

B.A meeting of the minds

C.Payment of money

D.Capacity of the parties

Payment of money is not necessary for a valid contract. Consideration is necessary, but consideration may take the form of property, services, or a promise to do something in the future.

What are the terms "adequate, good and sufficient, and valuable" related to?

A.Consideration

B.Just compensation

C.Legal description

D.Fiduciary duties

A.Consideration

B.Just compensation

C.Legal description

D.Fiduciary duties

Consideration may be referred to more formally as "adequate, good and sufficient, and valuable consideration."

Which of the following elements is not necessary to the existence of every contract?

A.Mutual consent

B.Written agreement

C.Parties capable of contracting

D.Lawful objective

A.Mutual consent

B.Written agreement

C.Parties capable of contracting

D.Lawful objective

Not all contracts are required to be in writing (although most contracts concerning real estate must be). The four necessary elements for any type of contract are mutual consent, capacity, consideration, and a legal objective.

Which of the following contracts would be required under the statute of frauds to be in writing?

A.Any agreement that is not to be performed within one year

B.Employment of a broker to negotiate a six-month lease on manufacturing equipment

C.Employment of a broker to purchase a real estate mortgage

D.Employment of a broker to sell trade fixtures and business goodwill

A.Any agreement that is not to be performed within one year

B.Employment of a broker to negotiate a six-month lease on manufacturing equipment

C.Employment of a broker to purchase a real estate mortgage

D.Employment of a broker to sell trade fixtures and business goodwill

The statute of frauds requires a writing for any agreement that will not be performed within one year of its making. The statute of frauds also requires a writing for an agreement authorizing an agent to find a buyer or seller for real property, but options B, C, and D involve only personal property and do not need to be in writing.

A seller sued a broker, alleging that the broker had misrepresented material facts during his sales presentation. The broker responded that the listing contract had only been an oral contract and therefore was not enforceable. A court would find that:

A.the listing broker can be liable for misrepresentation only to the buyers

B.the contract was unenforceable and therefore the seller had no basis for a suit

C.the broker cannot use the statute of frauds as a defense, since that is not at issue

D.the statute of frauds only applies to purchase contracts, not to agency agreements

A.the listing broker can be liable for misrepresentation only to the buyers

B.the contract was unenforceable and therefore the seller had no basis for a suit

C.the broker cannot use the statute of frauds as a defense, since that is not at issue

D.the statute of frauds only applies to purchase contracts, not to agency agreements

Whether or not the contract was in writing is not an issue in this case, because that isn't relevant to the seller's allegation of misrepresentation. So the broker cannot use the statute of frauds as a defense. (In contrast, whether the contract was in writing would be "at issue" if the broker sued the seller to claim his commission, because a broker must have a written contract in order to sue for compensation.)

Jones makes an offer for Smith's home that is $5,000 below the asking price and gives Smith 48 hours to accept the offer. If Jones changes his mind about purchasing the home, he can:

A. do nothing until the 48 hours have passed

B. revoke his offer before Smith accepts it

C. submit a counteroffer

D. sue Smith for breach of contract

A. do nothing until the 48 hours have passed

B. revoke his offer before Smith accepts it

C. submit a counteroffer

D. sue Smith for breach of contract

Correct! Jones can revoke his offer at any time until he receives notification that Smith has accepted it.

Three years ago Caldwell bought a home, and the seller told him there was 150 feet of street frontage. Caldwell recently arranged to sell the home to Adams. During their negotiations, Caldwell told Adams the street frontage was 150 feet. But after they signed their contract, a survey revealed that the frontage is only 130 feet. Adams can withdraw from the contract because of:

A. actual fraud

B. duress

C. menace

D. constructive fraud

E. undue influence

A. actual fraud

B. duress

C. menace

D. constructive fraud

E. undue influence

Correct! An unintentional misrepresentation is constructive fraud. Adams did not get what she bargained for, and she has legal grounds for terminating the contract.

Pierce makes an offer to Johnson that is $10,000 below the asking price. Johnson immediately makes a counteroffer that is only $5,000 below the asking price. Which of the following statements is true?

A. Pierce is under no obligation to continue with the transaction

B. Pierce must accept or reject Johnson's counteroffer

C. Pierce is bound by the counteroffer

D. Johnson cannot withdraw her counteroffer

E. Johnson's counteroffer was illegal

A. Pierce is under no obligation to continue with the transaction

B. Pierce must accept or reject Johnson's counteroffer

C. Pierce is bound by the counteroffer

D. Johnson cannot withdraw her counteroffer

E. Johnson's counteroffer was illegal

Legally, Johnson's counteroffer was a rejection of Pierce's offer. Pierce is under no further obligation.

Clark made friends with an elderly homeowner and then persuaded him to sell Clark his house for much less than its fair market value. This is an example of:

A. duress

B. undue influence

C. menace

D. fraud

E. constructive fraud

A. duress

B. undue influence

C. menace

D. fraud

E. constructive fraud

Correct! Undue influence typically involves taking advantage of a person's trust and vulnerability to persuade or pressure him to enter into a contract.

In negotiations with a prospective buyer, all of the following would be actual fraud, except:

A. deliberately lying about the condition of the property

B. describing the property with reckless indifference to accuracy

C. intentionally concealing a material defect

D. accidentally failing to disclose a material fact

A. deliberately lying about the condition of the property

B. describing the property with reckless indifference to accuracy

C. intentionally concealing a material defect

D. accidentally failing to disclose a material fact

Correct! Unintentional failure to disclose information would be constructive fraud, not actual fraud.

Forbes signed a contract without reading it first, only to discover later that the terms of the contract were not what she originally believed they were. What can she do about the contract?

A. Terminate the contract on grounds of undue influence

B. Terminate the contract, claiming she signed it under duress

C. Terminate the contract, because it wasn't fully explained

D. Withdraw from the agreement, claiming constructive fraud

E. Nothing; she is bound by the terms of the contract

A. Terminate the contract on grounds of undue influence

B. Terminate the contract, claiming she signed it under duress

C. Terminate the contract, because it wasn't fully explained

D. Withdraw from the agreement, claiming constructive fraud

E. Nothing; she is bound by the terms of the contract

Correct! A person who signed a contract without reading it is not excused from performance.

Which of the following is not required for the formation of a valid contract?

A. Legal capacity for both parties

B. Payment of money

C. In writing, if the contract concerns real property

D. A legal purpose

A. Legal capacity for both parties

B. Payment of money

C. In writing, if the contract concerns real property

D. A legal purpose

Correct! Consideration is required for a valid contract, but it does not have to be money. It can be anything the parties deem to be of value, including a promise to perform an act.

Which of the following is a means of terminating an offer?

A. Rejection of the offer by the offeror

B. Revocation of the offer by the offeree

C. Offeree's inquiry as to whether other terms are acceptable

D. Rejection of the offer by the offeree

A. Rejection of the offer by the offeror

B. Revocation of the offer by the offeree

C. Offeree's inquiry as to whether other terms are acceptable

D. Rejection of the offer by the offeree

Rejection of the offer by the offeree will terminate an offer. While a counteroffer will terminate an offer, a mere inquiry about different terms will not. Only the offeror can revoke the offer.

A buyer signs a deposit receipt, but her consent is based on false information provided by the broker. Which of the following is true?

A.The broker can't accept a commission

B.The offer can be accepted but is voidable by the buyer

C.The offer is illusory

D.The seller has a nonrevocable counteroffer

A.The broker can't accept a commission

B.The offer can be accepted but is voidable by the buyer

C.The offer is illusory

D.The seller has a nonrevocable counteroffer

If an offer or acceptance is influenced by a negative force, such as constructive fraud, then the contract is voidable by the injured party (in this case, the buyer).

A voidable contract is one that:

A.would be valid but cannot be proven in a court

B.has no legal effect, since it was never a valid contract

C.may be enforced or rescinded by one of the parties

D.contains all four legal elements necessary for validity

A.would be valid but cannot be proven in a court

B.has no legal effect, since it was never a valid contract

C.may be enforced or rescinded by one of the parties

D.contains all four legal elements necessary for validity

A contract is voidable if one party's consent was obtained through fraud, duress, or undue influence, or if one party is a minor and the contract does not involve real property. A voidable contract may be either rescinded or enforced by the victimized party.

A voidable contract remains binding on the victimized party until it is:

A.invalidated

B.ratified

C.qualified

D.rescinded

A.invalidated

B.ratified

C.qualified

D.rescinded

The victimized party to a voidable contract must take action to rescind the contract. If this is not done within a reasonable period of time, a court could decide that the contract has been ratified.

A seller accepted a proper offer in writing to purchase his property. He then refused to complete the transaction. If the buyer were to bring suit for failure to perform the contract, under the statute of limitations he would need to do so within:

A.1 year

B.2 years

C.3 years

D.4 years

A.1 year

B.2 years

C.3 years

D.4 years

In California, the statute of limitations for written contracts is four years. A lawsuit regarding breach of a written contract must be filed within this four-year period.

The term "laches" refers to:

A.a deficiency judgment

B.a contract whose contents cannot be proven in court

C.a court that does not have jurisdiction to decide a question

D.an inexcusable delay in pursuing a legal right

A.a deficiency judgment

B.a contract whose contents cannot be proven in court

C.a court that does not have jurisdiction to decide a question

D.an inexcusable delay in pursuing a legal right

Laches is a delay in pursuing a legal right. Even if a lawsuit was filed before the deadline set by the statute of limitations, if the plaintiff unnecessarily delayed taking legal action and the delay prejudiced the defendant's position, the court might decide to reject the plaintiff's claim.

A contractor agrees in writing to build a triplex on Dudley's vacant lot. After the contract has been signed, the contractor discovers the lot is zoned for single-family residential use only. What is the status of the contract?

Void

The contract is void. It would be unlawful to build a triplex on a single-family lot. A contract with an unlawful objective is void.

Stanton tells a broker he can list her commercial lot, but they don't put their agreement in writing. Within three weeks the broker finds a buyer for the property. At closing Stanton refuses to pay the brokerage commission she agreed to when the listing was negotiated. What is the status of the listing?

Unenforceable

The listing agreement is unenforceable. According to the statute of frauds, a contract concerning real estate—such as a listing agreement—must be in writing to be enforceable.

A property owner is forced to sign a purchase agreement under threat of physical harm. What is the status of the agreement?

Voidable

A contract that one party signed under duress is voidable by that party.

Six months ago, Dunn was declared mentally incompetent by a court. Now Dunn has just signed a contract to sell his home. What is the legal status of the contract?

Void

The contract is void. An incompetent person does not have contractual capacity, and an agreement signed by an incompetent person is void.

A broker, abusing the trust a property owner has placed in her, convinces the owner to list his home at a price he later determines to be well below market value. When he asks the broker to release him from the listing contract, the broker refuses. What is the status of the contract?

Voidable

The contract is voidable by the property owner. The broker exercised undue influence by abusing the trust the property owner placed in her. A contract that one party signed as a result of undue influence is voidable by that party.

Miller is buying Gilman's house for $650,000. They both have signed a written purchase agreement. They both have contractual capacity and freely consented to the terms of the contract. What is the status of their contract?

Valid

The contract is valid. The parties have capacity to contract, there was mutual consent, the contract has a lawful objective, consideration was exchanged, and the agreement was in writing.

A seller, after accepting a written offer, decides not to go through with the sale of his property. Five years later, the prospective buyer decides that he will file an action to compel the seller to perform. What is the status of the contract?

Unenforceable

The contract is unenforceable. The statute of limitations requires a person injured by the breach of a written contract to begin a lawsuit within four years.

Which of the following is not a necessary element in the formation of a contract?

A.Offer

B.Acceptance

C.Performance

D.Consideration

A.Offer

B.Acceptance

C.Performance

D.Consideration

Performance is the desired result of a contract but is not a necessary element in the formation of a contract.

If a contract has been rescinded, that means that it has been:

A.rewritten

B.annulled

C.rejected

D.performed

A.rewritten

B.annulled

C.rejected

D.performed

CORRECT!

Rescission annuls a contract. In other words, it invalidates the contract and puts the parties back as closely as possible into the positions they would have been in if they had never entered into the contract.

A broker failed to mention material facts about a property's soil instability problems to a buyer. If the buyer learns about the soil problems after his offer is accepted and decides the property is unacceptable, the buyer may:

A.have no choice but to go through with the contract

B.request a rescission of the contract

C.report this to the local building department

D.request a novation of the contract

A.have no choice but to go through with the contract

B.request a rescission of the contract

C.report this to the local building department

D.request a novation of the contract

A buyer who entered into a contract based on misinformation has grounds for a rescission of the contract. If the buyer chose to rescind, the contract would terminate and any deposit paid by the buyer would be refunded.

An existing contract was replaced by an entirely new contract. This would be defined as a:

A.conversion

B.novation

C.reformation

D.rescission

A.conversion

B.novation

C.reformation

D.rescission

A novation is the substitution of a new obligation for an old one. It can involve substituting a new contract for an existing contract between the same parties, or substituting a new party for one of the original parties to a contract.

Wilson wants to sell his home quickly, so he agrees to let the buyer take over his mortgage payments without asking for the lender's approval. What is this kind of arrangement called?

Assignment

This is an assignment; Wilson has assigned his mortgage to the buyer. Wilson is still liable to the lender, however, because he did not obtain the lender's approval.

ABC Investment puts up a $100,000 deposit when it signs an agreement to purchase a commercial lot. Then the firm suffers some business reversals and decides not to complete the transaction. The lot owner agrees to release ABC, but insists on keeping the deposit as damages. How was the contract discharged?

Cancellation

This is a cancellation. When a contract is canceled, the parties agree to terminate it without undoing the steps in the transaction that they've already taken.

Thompson leases an apartment for 24 months. After just six months, Thompson's employer transfers her to another city. A friend of Thompson's would like to take over her lease. The landlord accepts the new tenant and releases Thompson from liability. What is this arrangement called?

Novation

This is a novation. In a novation, the withdrawing party (Thompson) obtains the consent of the other party (the landlord) and is released from liability.

Farrell makes the final payment on his second mortgage, ending his obligation to the lender. How has this contract been discharged?

Performance

The contract has been discharged by performance. Most contracts are discharged by full performance of their terms.

Casey agrees to purchase Peter's house. Before the deal closes, though, Casey loses his job and cannot obtain the necessary financing. Peter returns Casey's earnest money deposit to him. What is this arrangement called?

Rescission

This is a rescission. When both parties are returned to the positions they were in before the contract was made, it's called rescission.

The amount of consideration offered in exchange for real property must be sufficient, relative to the value of the property, to support an action for:

A.rescission

B.specific performance

C.liquidated damages

D.unlawful detainer

A.rescission

B.specific performance

C.liquidated damages

D.unlawful detainer

A court will usually not order specific performance if the consideration offered in exchange for the property is substantially less than the actual value of the property.

A buyer of a property fulfilled his part of the contract and then requested the seller to convey title. The seller refused to do so. By fulfilling his part of the contract and asking the seller to perform, the buyer made a:

A.breach

B.tender

C.warranty

D.demand

A.breach

B.tender

C.warranty

D.demand

When one party to a contract performs or unconditionally offers to perform as agreed, it is known as a tender. This is a necessary step before taking legal action against the other party for failure to perform.

As a general rule, the non-breaching party must make a _______________ before she can sue for breach of contract.

Tender

Sometimes _______________ is the result of an agreement between the parties. In other cases, it is a court-ordered remedy for breach of contract.

Rescission

When a court orders someone who has breached a contract to fulfill the terms of the contract, it's called an order of _______________.

Specific Performance

The most common remedy for breach of contract is _______________.

Compensatory Damages

When a residential real estate transaction is canceled as a result of the buyer's default, the standard remedy is _______________.

Liquidated Damages

A contract is bilateral if:

A. each party makes a promise, so that both parties are legally obligated to perform

B. only one of the parties is legally obligated to perform

C. it has been put into words (spoken or written)

D. it is in the process of being performed

A. each party makes a promise, so that both parties are legally obligated to perform

B. only one of the parties is legally obligated to perform

C. it has been put into words (spoken or written)

D. it is in the process of being performed

In the contract, the parties agree in advance that $10,000 will serve as full compensation to be paid in the event that one of the parties defaults. This sum is called:

A. cancellation damages

B. consideration

C. specific performance

D. liquidated damages

A. cancellation damages

B. consideration

C. specific performance

D. liquidated damages

Which of these is one of the four basic elements needed to make a contract valid and legally binding?

A. Unilateral promise

B. Counteroffer

C. Mutual consent

D. Voidability

A. Unilateral promise

B. Counteroffer

C. Mutual consent

D. Voidability

A contract is voidable if one of the parties:

A. signed it under duress

B. used misrepresentation to persuade the other to enter into it

C. has the right to rescind it

D. All of the above

A. signed it under duress

B. used misrepresentation to persuade the other to enter into it

C. has the right to rescind it

D. All of the above

Once a contract has been fully performed, it is said to be:

A. executory

B. executed

C. unilateral

D. implied

Once a contract has been fully performed, it is said to be:

A. executory

B. executed

C. unilateral

D. implied

In California, to have legal capacity to enter into a contract, a person must be:

A. at least 21 years old

B. able to read and to sign his or her name

C. registered with the superior court

D. mentally competent

In California, to have legal capacity to enter into a contract, a person must be:

A. at least 21 years old

B. able to read and to sign his or her name

C. registered with the superior court

D. mentally competent

The statute of frauds applies to:

A. a purchase agreement for a house

B. a purchase agreement for vacant land

C. a listing agreement for a piece of commercial real estate

D. All of the above

The statute of frauds applies to:

A. a purchase agreement for a house

B. a purchase agreement for vacant land

C. a listing agreement for a piece of commercial real estate

D. All of the above

The key difference between an assignment and a novation is that in a novation:

A. the withdrawing party is released from liability

B. the withdrawing party remains secondarily liable

C. the other party's consent is not required

D. the statute of frauds does not apply

The key difference between an assignment and a novation is that in a novation:

A. the withdrawing party is released from liability

B. the withdrawing party remains secondarily liable

C. the other party's consent is not required

D. the statute of frauds does not apply

A contract is not formed if the offer is:

A. revoked before it is accepted

B. accepted before it expires

C. revoked after it is accepted

D. accepted without any modification of its terms

A contract is not formed if the offer is:

A. revoked before it is accepted

B. accepted before it expires

C. revoked after it is accepted

D. accepted without any modification of its terms

The buyer and seller agreed that they would terminate their purchase agreement and the seller would keep the good faith deposit the buyer had given him. This is an example of:

A. revocation

B. novation

C. rescission

D. cancellation

The buyer and seller agreed that they would terminate their purchase agreement and the seller would keep the good faith deposit the buyer had given him. This is an example of:

A. revocation

B. novation

C. rescission

D. cancellation

A contract signed under duress:

A. can be rescinded by either party

B. is voidable by the party who was forced to sign

C. does not fulfill the requirements of the statute of frauds

D. is treated as an implied contract

A contract signed under duress:

A. can be rescinded by either party

B. is voidable by the party who was forced to sign

C. does not fulfill the requirements of the statute of frauds

D. is treated as an implied contract

Which of these is a legal remedy that compels the party who has breached the contract to perform as agreed?

A. Rescission

B. Damages

C. Specific performance

D. Full performance

Which of these is a legal remedy that compels the party who has breached the contract to perform as agreed?

A. Rescission

B. Damages

C. Specific performance

D. Full performance

A statute of limitations:

A. limits the amount of consideration a party to a contract can be required to pay

B. limits the number of contracts a person can enter into in one year

C. sets a deadline for filing a lawsuit

D. sets a deadline for fulfilling the terms of a contract

A statute of limitations:

A. limits the amount of consideration a party to a contract can be required to pay

B. limits the number of contracts a person can enter into in one year

C. sets a deadline for filing a lawsuit

D. sets a deadline for fulfilling the terms of a contract

Consideration is:

A. not required for contracts that have been put into writing

B. not required if the contract has a lawful objective

C. something of value exchanged by the contracting parties

D. formal execution of the contract in the presence of at least two witnesses

Consideration is:

A. not required for contracts that have been put into writing

B. not required if the contract has a lawful objective

C. something of value exchanged by the contracting parties

D. formal execution of the contract in the presence of at least two witnesses

A 17-year-old married man attempts to convey real property that he inherited from a relative. The contract to sell the property would be:

A. valid

B. void

C. voidable

D. unenforceable

A 17-year-old married man attempts to convey real property that he inherited from a relative. The contract to sell the property would be:

A. valid

B. void

C. voidable

D. unenforceable

A valid, enforceable contract may be discharged by:

A. the statute of frauds

B. consideration

C. breach of contract

D. agreement between the parties

A valid, enforceable contract may be discharged by:

A. the statute of frauds

B. consideration

C. breach of contract

D. agreement between the parties

If no action is taken to rescind a voidable contract:

A. it automatically becomes void

B. a court may declare that the contract has been ratified

C. it cannot be enforced until the statute of frauds expires

D. it must be assigned to another party

If no action is taken to rescind a voidable contract:

A. it automatically becomes void

B. a court may declare that the contract has been ratified

C. it cannot be enforced until the statute of frauds expires

D. it must be assigned to another party

When the parties to a contract agree to rescind it:

A. performance must be completed within six months

B. the parties return any consideration that has been exchanged

C. a new party is substituted for one of the original parties

D. All of the above

When the parties to a contract agree to rescind it:

A. performance must be completed within six months

B. the parties return any consideration that has been exchanged

C. a new party is substituted for one of the original parties

D. All of the above

When an offeree makes a counteroffer:

A. no contract is formed unless the original offeror accepts the counteroffer

B. the original offeror is required to accept the offeree's modified terms

C. if the original offeror does not accept the offeree's modifications, they have a binding contract on the terms originally offered

D. it creates a binding contract on the offeree's modified terms, unless the modifications are unreasonable

When an offeree makes a counteroffer:

A. no contract is formed unless the original offeror accepts the counteroffer

B. the original offeror is required to accept the offeree's modified terms

C. if the original offeror does not accept the offeree's modifications, they have a binding contract on the terms originally offered

D. it creates a binding contract on the offeree's modified terms, unless the modifications are unreasonable