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Chapter 7—Contract Law
MULTIPLE CHOICE
1. All of the following are real estate contracts EXCEPT
a.
an exclusive right to sell listing.
b.
a sales agreement.
c.
a closing statement.
d.
a lease.
2. A meeting of the minds creating enforceable rights is called
a.
a contract.
b.
an estoppel.
c.
a lien.
d.
a deed.
3. The agency relationship of a real estate broker with his client is most often established by
a.
an implied contract.
b.
express contract.
c.
an endorsement.
d.
a ratification.
4. A lease is an example of a
a.
non-contractual agreement.
b.
declaration of intent.
c.
unilateral contract.
d.
bilateral contract.
5. A contract that results when a promise is exchanged for a promise is called
a.
bilateral contract.
b.
unilateral contract.
c.
express contract.
d.
implied contract.
6. When one party to a contract makes a promise without first receiving any promise of performance
from the other, it is called
a.
a bilateral contract.
b.
an implied contract.
c.
a unilateral contract.
d.
an executory contract.
7. Assuming that no fraud is intended, what is the status of a contract signed by an illiterate person?
a.
Valid
b.
Void
c.
Voidable
d.
Unenforceable
8. A real estate contract can be declared void if
a.
it is signed and not read.
b.
It is signed with a witnessed X.
c.
signed by only one party.
d.
it is signed by an unmarried minor.
9. In the absence of a special provision for such an event, an offer to purchase will probably be voided
a.
by the death of either buyer or seller before acceptance.
b.
if the seller changes his mind after accepting the offer.
c.
if not accepted within 24 hours.
d.
if the seller should receive a higher offer from another buyer.
10. A contract entered into by a minor is
a.
illegal.
b.
voidable.
c.
valid.
d.
unenforceable.
11. When a contract appears to be good and binding but, in fact, one of the parties may legally reject it, the
contract is said to be
a.
unenforceable.
b.
valid.
c.
void.
d.
voidable.
12. The buyer agreed to buy the property at the seller’s asking price. They shook hands on the deal.
Later, the seller refused to sell. If the buyer still wants to buy, he can
a.
hire an attorney and sue for non-performance.
b.
go to a small claims court and sue for damages.
c.
consult a real estate broker and ask her to explain that the seller must honor the agreement.
d.
do nothing.
13. All of the following are essential elements of a contract EXCEPT
a.
competent parties.
b.
lawful objective.
c.
monetary consideration.
d.
meeting of the minds.
14. Which of the following is an essential element of a contract?
a.
A counter offer
b.
Acceptance
c.
Performance
d.
A fair price
15. Which of the following are considered to be legally competent?
a.
Corporations
b.
Persons of unsound mind
c.
Minors
d.
A 15 year old woman
16. To be legally competent, a person must reach the age of
a.
minority.
b.
majority.
c.
reasonable competence.
d.
17 years.
17. John and Jay are brothers who received title to a property from their father. When they decided to sell
the property, Jay was out of town. In order to properly transfer title, the deed could be signed by
a.
John alone, since they are brothers.
b.
John, with a properly recorded power of attorney from Jay.
c.
John and the father, since the father was the original owner.
d.
no one, since both must be present.
18. The broker has the power to sign documents for the principal. This is probably because she holds
a.
a power of attorney.
b.
an agency relationship.
c.
special agent status.
d.
an attorney-at-law.
19. The party making an offer is called the
a.
offeree.
b.
grantee.
c.
offeror.
d.
agent.
20. An offeree who wishes to bind the offeror to the contract may do which of the following with an offer?
a.
Accept it
b.
Modify it slightly before acceptance
c.
Withdraw it prior to acceptance
d.
Accept and counter with conditions
21. A man put up $10,000 as earnest money on a property for sale. The next day, he needed the money
back and attempted to cancel his offer. Which of the following is true?
a.
He can get out of the offer because he has a three day right of rescission.
b.
The decision would be entirely up to the broker.
c.
He can get out of the offer because of the six-day right of rescission.
d.
He would have to revoke the offer before the seller accepted it.
22. A real estate broker could most likely be held liable to a buyer if the broker
a.
makes a misrepresentation to the buyer based on false information given to him by the
seller.
b.
signs an agreement with the buyer on behalf of the seller under the power of attorney
granted by the seller.
c.
acts in excess of the authority given to him by the seller under a listing agreement.
d.
retains the buyer’s check at the seller’s request after an offer has been accepted by the
seller and acceptance has been communicated to the buyer.
23. A contract created under duress is
a.
invalid.
b.
voidable.
c.
unenforceable.
d.
void.
24. When the prospective tenant signed the lease, he indicated that he would be using the building to sell
appliances. Later, the landlord discovered that illegal bingo games were being played there. What can
the landlord do?
a.
He can do nothing as long as the tenant is current with the rent.
b.
He can declare the lease void and start eviction proceedings.
c.
He must have a conversation with the tenant to try to persuade him to stop the illegal
activity.
d.
He can organize a boycott.
25. Two persons make an oral agreement. A day later they put it in writing with several small changes.
What is true about the agreement in a court of law?
a.
The oral one would prevail
b.
The written one would prevail
c.
A new agreement must be made
d.
The agreement must be notarized to be legal
26. The requirement that transfers of real property be in writing is known as
a.
contract law.
b.
the bill of rights.
c.
the statute of frauds.
d.
due process.
27. An executory contract is a
a.
contract which has been completely executed.
b.
contract in which certain things are still to be done.
c.
will in probate for which an executor has been named.
d.
contract which has not been signed.
28. If a contract is breached and the damaged party wants the contract carried out, he would sue for
a.
specific performance.
b.
money damages.
c.
novation.
d.
unilateral rescission.
29. The term “rescinded” in real estate means
a.
rewritten.
b.
rejected.
c.
reworded.
d.
canceled.
30. The sum of money agreed upon in advance to be the damages in the event certain problems occur later
is best described as
a.
judgement damages.
b.
liquidated damages.
c.
default damages.
d.
punitive damages.
TRUE/FALSE
1. A contract that results not from a written or oral agreement but from the actions of the parties involved
is called an expressed contract.
2. If a contract is considered voidable, it is valid until voided.
3. If a contract is made under duress, it would be void.
4. An acknowledgement is necessary for a valid real estate contract.
5. A real estate contract can be declared void if it is not signed.
6. The absence of duress, menace and undue influence are requirements of lawful objective.
7. The broker and the seller know of major plumbing repairs to be made. They sell the house to a buyer
“as is” but do not disclose the plumbing problems. The buyer discovers the defects after closing and
sues the broker and seller. Most likely, the buyer can collect, because the defect should have been
disclosed.
8. Money or anything worth money exchanged in a contract is classified as unilateral consideration.
9. A contract can be discharged by novation.
10. The statute of limitations concerns time limits for filing a lawsuit.
11. A unilateral contract results when a promise is exchanged for a promise.
12. A minor change in the terms of a contract does not constitute a counteroffer.
13. A fraud is an act intended to deceive for the purpose of inducing another to part with something of
value.
14. A mistake includes innocent misrepresentation, ignorance, inability, or poor judgment.
15. The purpose of requiring consideration is to demonstrate that a bargain has been struck between the
parties to the contract.
16. Rights, benefits, and obligations under a contract can not be assigned to someone else.
17. Partial performance may never be accepted as a remedy for breach of contract.
18. Under certain circumstances, the innocent party can unilaterally rescind a contract.
19. An alternative to mutual recession is novation.
20. A lawsuit for specific performance is an action in court to force the innocent party to carry out the
remainder of the contract.
COMPLETION
1. A(n) ____________________ contract occurs when the parties to the contract declare their intentions
either orally or in writing.
2. A(n) ____________________ contract results when a promise is exchanged for performance.
3. A contract that has no binding effect on the parties who made it is a(n) ____________________
contract.
4. A promise not to act by one or more of the parties to a contract is known as ____________________.
5. As a requirement of a valid contract ____________________ and ____________________ requires
that one party makes an offer to another party.
6. For an agreement to be enforceable it must be supported by ____________________ to demonstrate
that a bargain has been struck between the parties to the contract.
7. Under certain circumstances the ____________________ evidence rule permits oral evidence to
complete an otherwise incomplete or ambiguous written contract.
8. A contract that is in the process of being carried out is said to be ____________________, that is, in
the process of being performed.
9. A lawsuit for _________________________ is an action in court by the innocent party to force the
breaching party to carry out the remainder of the contract according to the precise terms, price and
conditions agreed upon.
10. Once the seller accepts an offer, if the buyer fails to complete the purchase, the seller may keep the
buyer’s deposit as ______________________________.
MATCHING
Choose the one most appropriate answer for each.
a.
assign
k.
money damages
b.
attorney-in-fact
l.
mutual agreement
c.
breach of contract
m.
novation
d.
competent party
n.
offeror
e.
consideration
o.
rescind
f.
counteroffer
p.
specific performance
g.
duress
q.
statute of frauds
h.
forbear
r.
unilateral contract
i.
fraud
s.
void contract
j.
liquidated damages
t.
voidable contract
1. a contract in which one party makes a promise or begins performance without first receiving any
promise to perform from the other
2. an act intended to deceive for the purpose of inducing another to part with something of value
3. a person who is considered legally capable of entering into a contract
4. the party who makes an offer
5. a contract that is not legally binding on any of the parties that made it
6. an offer made in response to an offer
7. to cancel a contract and restore the parties involved to their respective positions before the contract
was made
8. use of force to obtain contract agreement
9. not to act
10. to transfer one’s rights in a contract to another person
11. damages that can be measured in and compensated by money
12. failure, without legal excuse, to perform any promise called for in a contract
13. contract performance according to the precise terms agreed upon
14. a sum of money called for in a contract that is to be paid if the contract is breached
15. a contract that is able to be voided by one of its parties
16. the person holding a power of attorney on behalf of another
17. a meeting of the minds
18. an act or promise given in exchange for something
19. requires all contracts for the sale of land to be in writing to be enforceable in a court of law
20. the substitution of a new contract for an existing one
