Deck 5: Contracts

Question 1

Generally, powers of attorney are automatically revoked by the death or insanity of the principal.

Answer 1

True

Question 2

All contracts must be in writing to be enforceable.

Answer 2

False

Question 3

A minor's contract is voidable at the election of the minor.

Answer 3

True

Question 4

The seller should be identified in a contract exactly the way the seller holds title to the real property.

Question 5

Lack of knowledge or inability or failure to read a contract does not make a person a mental incompetent.

Question 6

Termination of a contract and reimbursement for expenses is known as specific performance.

Question 7

Not every contract must be in writing to be enforceable.

Question 8

An agreement whereby an owner hires a broker to sell real property is known as a listing agreement.

Question 9

Illiteracy of a party renders a contract unenforceable.

Question 10

An agreement whereby an owner hires a broker to sell real property is known as a power of attorney.

Question 11

Liquidated damage provisions contained in contracts are always enforceable.

Question 12

It is not necessary for a contract to state consideration flowing from one party to another.

Question 13

Liquidated damage provisions contained in a contract are designed to punish a party for not performing.

Question 14

An executor always has the power to buy and sell real property on behalf of an estate.

Question 15

A contract entered into by a trustee must be approved by the beneficiaries of the trust.

Question 16

An executor has limited power to buy and sell real property on behalf of the estate.

Question 17

Requiring a party to perform under a contract is known as rescission.

Question 18

The sale of property by a limited partnership requires that the limited partners sign the contract.

Question 19

The amount of money damage for a breach of contract is the difference between the contract price and the market value of the real property at the time and place of default.

Question 20

The amount of money damage for a breach of contract is the difference between the contract price and the market value of the real property at the time the suit is brought for breach of contract.

Question 21

Earnest money under a contract is always the down payment of the purchase price.

Question 22

The failure to meet a condition precedent makes a contract unenforceable.

Question 23

Cash equivalents are certified funds and a cashier's or treasurer's check.

Question 24

All of the promises, conditions, and covenants contained in a contract are merged into the deed of conveyance at the time of closing and do not survive the closing of the sale.

Question 25

The law of a state where the contract is signed generally controls enforcement of a real estate contract.

Question 26

Money paid by purchaser at the time the contract is signed is called earnest money.

Question 27

A personal check is deemed a cash equivalent under a contract.

Question 28

Absent a provision to the contrary in the contract, the risk of loss for destruction to the property passes to the purchaser at the time the contract is signed.

Question 29

A purchaser usually takes possession of the property at the time of the closing of the contract.

Question 30

If time is not of the essence, a party has a reasonable period of time after a date specified in a contract to perform.

Question 31

Title that a prudent purchaser with full knowledge of all the facts would accept is known as insurable title.

Question 32

Time is of the essence makes time limits set forth in a contract strictly enforceable.

Question 33

The contract should state the purchase price of the property.

Question 34

The date the purchaser takes possession of the property is known as the closing date of the contract.

Question 35

The closing costs of the sale are always paid by the purchaser.

Question 36

Marketable title and insurable title are the same thing.

Question 37

Free assignment of a real estate contract by purchaser and seller can be prohibited in the contract.

Question 38

The law in most states prohibits parties from orally testifying about a written contract.

Question 39

Title that a prudent purchaser with full knowledge of all the facts would accept is known as marketable title.

Question 40

The closing costs of the sale are always paid by the seller.

Question 41

In many states, a real estate broker may be able to represent both the seller and the purchaser in the same transaction.

Question 42

The remedy for breach of a real estate contract which requires that the defaulting party perform their obligations under the contract is known as:

A) liquidated damages
B) specific performance
C) rescission
D) time is of the essence

Question 43

A real estate broker is not a fiduciary.

Question 44

Which one of the following lacks legal capacity to enter into a binding contract?

A) partnerships
B) executors
C) corporations
D) mental incompetent

Question 45

For which of the following persons would a power of attorney most likely be used?

A) trustee
B) minor
C) agent
D) mental incompetent

Question 46

The measure of monetary damages for breach of a real estate contract is computed as follows:

A) the equivalent to the purchase or sale price
B) the difference between fair market value of the property and contract price at time of default
C) the difference between fair market value of the property and contract price at time of lawsuit
D) reimbursement for any expenses incurred by the injured party

Question 47

It is necessary for real estate contracts to be witnessed, notarized, and recorded.

Question 48

A real estate broker may be able to place a lien against an owner's property to secure unpaid real estate commissions.

Question 49

Which of the following are grounds for revocation of a power of attorney?

A) revocation by express act of principal
B) revocation by death of principal
C) appointment of new agent for the same purpose
D) all of the above

Question 50

It is not necessary for real estate contracts to be witnessed, notarized, and recorded.

Question 51

Which of the following is not a requirement for a valid contract?

A) mutual agreement
B) signatures of the parties
C) lawful purpose
D) consideration

Question 52

A real estate broker may have both express authority and implied authority.

Question 53

A real estate broker's implied authority is that authority given to the broker in the listing agreement by the owner of the property.

Question 54

A real estate broker can only have express authority.

Question 55

Which of the following is most likely not a defense to the enforceability of a contract?

A) illiteracy
B) mental incompetency
C) violation of trust instrument
D) infancy

Question 56

A real estate broker owes to his or her client a duty to exercise all of the affairs of the client in good faith and with loyalty.

Question 57

A principal does not owe any duties and obligations to an agent.

Question 58

A real estate broker cannot represent both the seller and the purchaser in a transaction.

Question 59

The remedy of rescission provides the injured party under a real estate contract with the following relief:

A) contract is terminated and injured party is entitled to reimbursement for expenses
B) contract is terminated with no reimbursement for expenses
C) contract is terminated and injured party is entitled to recover their lost profits
D) none of the above

Question 60

The law of the state where the real property is located generally controls enforcement of a real estate contract.

Question 61

Most states recognize the validity of the electronic signature of:

A) the seller of a contract
B) the purchasers of a contract
C) the notary public
D) all of the above

Question 62

Seller offers to sell their home to a purchaser for $70,000.00. The purchaser responds that they will buy the home for $60,000.00. The seller refuses the purchaser's offer to buy for $60,000.00. After that refusal, the purchaser then offers to buy the home for $70,000.00. At this time, the legal relationship of the parties is:

A) there is a contract to purchase the home for $70,000.00
B) there is an offer to purchase the home for $70,000.00
C) none of the above
D) all of the above

Question 63

Which of the following is generally not a duty that a principal owes to an agent?

A) duty to compensate the agent for his or her work
B) duty to follow the instructions of the agent
C) duty to reimburse the agent for expenditures
D) duty to indemnify the agent against any third-party claims

Question 64

An agreement under contract which provides that in an event of default, the purchaser is entitled to $10,000.00 from the seller is known as a:

A) rescission provision
B) "time is of the essence" provision
C) specific performance provision
D) liquidated damage provision

Question 65

A short sale is a real estate sale that must take place quickly.

Question 66

Being underwater on a mortgage occurs when the value of the property mortgaged is less than the debt secured by the mortgage.

Question 67

Most states do not recognize the validity of the electronic signatures of notaries.

Question 68

Being underwater on a mortgage occurs when the value of the property mortgaged exceeds the debt secured by the mortgage.

Question 69

Seller enters into a contract with purchaser to sell real property for $100,000.00. Purchaser defaults on the contract, and at the time of default the fair market value of the property is $90,000.00. Seller shall be entitled to recover from purchaser the following money damages:

A) 0
B) $100,000.00
C) $10,000.00
D) $90,000.00

Question 70

In most states, a contract may be signed with an electronic signature.

Question 71

When the mortgage lender agrees to release its mortgage for less than the owed debt, the sale is called:

A) a power of sale
B) a short sale
C) an exchange sale
D) an escrow sale

Question 72

An agreement whereby an owner of real property hires a real estate broker to help sell the property is known as:

A) power of attorney
B) rescission agreement
C) listing agreement
D) mutual agreement

Question 73

Seller and purchaser enter into a contract to purchase real property at a fair market value of $100,000.00. Seller refuses to perform the contract and at the time of seller's default the fair market value of the property is $110,000.00. The purchaser can recover from the seller the following money damages:

A) $100,000.00
B) 0
C) $10,000.00
D) $110,000.00