Contracts Flashcards
All of the following listings require that the broker be the “procuring cause” of the sale if he/she is to be entitled to a commission, EXCEPT:
A) - exclusive listing.
B) - open listing.
C) - exclusive right to sell listing.
D) - None of the above
C) - exclusive right to sell listing.
Answer: C—Under an Exclusive Authorization and Right to Sell Listing, the listing broker is entitled to a commission if the property sells through the efforts of the broker or any other person. The broker is not required to produce a buyer or be the procuring cause to be entitled to a commission.
A 17-year-old girl inherits a parcel of vacant land from her uncle. While still a minor, she deeds the land to her church which promptly builds on it. When she turns 18, she decides she wants the land back. In this case she:
A) - cannot get it back under any circumstances.
B) - must buy it back.
C) - can get the land back.
D) - All of the above
C) - can get the land back.
Answer: C—Most contracts, except those for necessities such as food and clothing, entered into by a minor are generally voidable at the minor’s option. The minor must disaffirm the contract within a reasonable time after attaining legal age. If the minor does not disaffirm the contract within a reasonable time, it becomes fully enforceable. A minor may receive realty by gift or inheritance.
A contract based on an illegal consideration is:
A) - valid.
B) - void.
C) - legal.
D) - enforceable.
B) - void.
Answer: B—A contract must be legal in its formation and operation. Both its consideration and its object must be lawful.
Mr. Owner enters into an exclusive listing with Broker X. One week later, Broker X brings in a full price offer, but Mr. Owner refuses the offer. Seeking an action of Specific Performance would be an option for:
A) - the buyer.
B) - the broker.
C) - both the buyer and the broker.
D) - neither the buyer nor the broker.
D) - neither the buyer nor the broker.
Answer: D—Specific performance is an action brought in a court of equity in special cases to compel a party to carry out the terms of a contract. There never was a contract between the buyer and seller since the offer was refused. Specific performance is not used to specifically enforce a contract to perform personal services, such as a broker’s agreement to find a buyer.
Four months ago, a seller entered into a legally binding written contract to sell his property. Later, the seller refused to complete the transaction since he felt the value of the property would increase in the near future. Under these circumstances, the Statute of Limitations could affect the rights of the buyer to prevail in a civil action due to a breach of the written contract within:
A) - 90 days.
B) - one year.
C) - two years.
D) - four years.
D) - four years.
Answer: D—A right rising out of a written contract must be pursued in court within four years of the default (breach), according to the Statute of Limitations.
A listing agreement is:
A) - a promise for a promise.
B) - a bilateral contract.
C) - an employment contract.
D) - All of the above
D) - All of the above
Answer: D—A listing agreement is an employment agreement between an owner of property and the real estate broker authorizing the broker to find a buyer for the property. They are also bilateral contracts in that the seller promises to pay the broker a commission when the property sells and the broker promises to make reasonable efforts to obtain a purchaser.
When a lessee transfers all of his/her interest in the property, it is called a(n):
A) - assumption.
B) - assignment.
C) - sale.
D) - transfer.
B) - assignment.
Answer: B—An assignment of a lease is the transfer of all title, right, and interest that a lessee possesses in a certain property.
Broker Jones takes an exclusive listing on a property owned by three different people. Broker Jones takes the listing contract to each of their places of business to get it signed. Broker Jones must:
A) - give a copy to the first owner who signs only.
B) - give a copy to each owner when he/she signs.
C) - give one copy to any of the three owners.
D) - get them together in one place to sign at the same time.
B) - give a copy to each owner when he/she signs.
Answer: B—When there are multiple owners, the broker is required to provide a copy of the listing contract to each owner when they sign.
A broker brought in an offer but the listing agreement did not include an authorization to accept a deposit. Which of the following is correct?
A) - The authorization is implied.
B) - The broker cannot accept the deposit.
C) - If the broker accepts the deposit, he/she would do so as the agent of the buyer.
D) - None of the above
C) - If the broker accepts the deposit, he/she would do so as the agent of the buyer.
Answer: C—If the scope of authority of a real estate broker is limited to just producing a buyer, the broker does not have the authority to collect a deposit on behalf of the seller. When an agent does collect a deposit in this case, the agent is acting as agent for the buyer (offeror) and not the seller.
A buyer has entered into an agreement with more than one buyer’s agent at the same time but owes compensation only if she uses the services of a buyer’s broker. This arrangement is known as a(n):
A) - multiple-listing agreement.
B) - exclusive right agreement.
C) - exclusive agency agreement.
D) - open agreement.
D) - open agreement.
Answer: D—The open buyer agency agreement is similar to an open listing seller agreement.
A verbal agreement between two brokers to split a commission is:
A) - enforceable.
B) - void under the Statute of Frauds.
C) - unenforceable.
D) - voidable
A) - enforceable.
Answer: A—A verbal agreement between two brokers to split a commission is enforceable and is one of the exceptions to the Statute of Frauds.
A broker has listed Mr. Applegate’s property under a net listing. He also has an option to purchase the property within 30 days. If after 27 days, the broker decides to buy the property, he must:
A) - disclose all material facts known to him and to the seller.
B) - inform the seller of any additional offers on the property.
C) - disclose any profit he might make.
D) - All of the above
D) - All of the above
Answer: D—If a broker employed to sell property is also given an option to purchase the property himself, he occupies the dual status of agent and purchaser and he is not entitled to exercise his option except by divesting himself of his obligation as agent by making a full disclosure of all material facts known to him. The broker must also inform the principal of the amount of profit the broker will make, and obtain written consent from the principal approving the amount of such profit before the broker may exercise the option.
Which of the following can be recorded?
A) - an Exclusive Authorization and Right to Sell Listing
B) - an Exclusive Agency listing
C) - contracts of sale
D) - All of the above
C) - contracts of sale
Answer: C—Listings cannot be recorded. Recording is used for written instruments affecting the title to real property, such as deeds, mortgages, trust deeds, contracts for sale, options and assignments.
A tenant’s five-year lease has expired but they continue to live on the premises and pay their rent monthly. This is considered a(n):
A) - semi-annual tenancy.
B) - periodic tenancy.
C) - estate at will.
D) - estate for years.
B) - periodic tenancy.
Answer: B—At the end of the lease term if the tenant offers an additional rent payment and the landlord accepts the payment, the lease is renewed as a periodic tenancy. The lease continues from period-to-period until one of the parties gives notice of termination.
In a new counter-offer:
A) - the counteror becomes the counteree.
B) - the counteror can change the terms of the offer unilaterally.
C) - the counteree can change the terms of the offer unilaterally.
D) - the terms of the offer can never be changed.
A) - the counteror becomes the counteree.
Answer: A—In a counter-offer the positions of the parties are reversed – offeror becomes offeree.
On the last day of a 90-day exclusive listing, broker Jones submits a list of names of people with whom he negotiated to the seller. Broker Jones accidentally left out Adams’ name. One week later, the owner sells to Adams. Which of the following is correct?
A) - Adams is liable for the full commission.
B) - The owner is liable for the full commission.
C) - The owner is liable for half of the commission.
D) - The owner is not liable for any commission.
D) - The owner is not liable for any commission.
Answer: D—A safety clause in a listing requires the broker to submit the names of all prospective buyers with whom he/she negotiated prior to the expiration of the listing.
Mr. Seller signs an open listing on his home with five different brokers. In this case:
A) - each broker has an opportunity to earn the entire commission.
B) - the brokers will split the commission five ways regardless of who sells it.
C) - the owner must pay a full commission to all five brokers when it sells.
D) - the owner must pay the first broker to take the listing no matter who sells it.
A) - each broker has an opportunity to earn the entire commission.
Answer: A—An open listing is one given to any number of brokers who can work simultaneously to sell the owner’s property. The first broker, to secure a buyer who is ready, willing and able to purchase at the terms of the listing, earns the commssion.
An agent acquired a listing for a house and orally promised to hold an open house every week until the house was sold. The agent failed to hold them as promised. This is an example of:
A) - illusory fraud.
B) - constructive fraud.
C) - actual fraud.
D) - deliberate fraud.
B) - constructive fraud.
Answer: B—Constructive fraud is a breach of duty as by a person in a fiduciary capacity, without an actual fraudulent intent. Actual fraud is an act intended to deceive another; e.g., making a false statement or false promise without intending to perform it.
On June 10, a prospective buyer gave a deposit to a broker and signed the usual form of an offer to purchase property. The deposit form included the statement, “This offer is irrevocable for five days.” On June 11 and before the offer had been accepted by the seller, the buyer contacted the broker and withdrew his offer and demanded the return of his deposit. The broker:
A) - has until June 16 to obtain the seller’s acceptance.
B) - has until June 15 to obtain the seller’s acceptance.
C) - must return the deposit to the buyer as demanded.
D) - must place the deposit in a neutral escrow until the five day period expires.
C) - must return the deposit to the buyer as demanded.
Answer: C—It is a basic tenant of contract law that any offer may be revoked any time prior to acceptance and the buyer gets the deposit back. It doesn’t matter how many days the buyer gave the seller to accept.
The word “laches” most nearly pertains to:
A) - doors and other swinging items.
B) - failure to do something.
C) - doing something within a prescribed time.
D) - failure to do something within a prescribed time.
D) - failure to do something within a prescribed time.
Answer: D—Laches means failing to do something which should have been done, i.e., to file a claim or to enforce a right, all within a prescribed time. The Statute of Limitations outlines actions that can be brought within a certain time frame.
A “safety clause” is found in a:
A) - deposit receipt.
B) - loan broker’s statement.
C) - lease.
D) - listing agreement.
D) - listing agreement.
Answer: D—A “safety clause” is a clause found in the listing contract that provides payment of a commission to the listing broker should the seller sell the property after the listing expires.
Which of the following requires real estate listings to be in writing?
A) - Real Estate Law
B) - Statute of Frauds
C) - CAR
D) - None of the above
B) - Statute of Frauds
Answer: B—The Statute of Frauds generally requires all contracts for the sale of land or any interest therein (including listings) to be in writing.
An exclusive agency listing between a broker and owner incorrectly states 6 dollars rather than 6 percent as the commission payable to the broker if he produces a buyer. If the owner sells the property himself, the broker is entitled to:
A) - 6 percent regardless of the mistake.
B) - an amount to be determined in arbitration.
C) - 6 dollars.
D) - nothing.
D) - nothing.
Answer: D—Look out! Since this is an exclusive agency listing, the owner may sell the property himself/herself without being liable for a commission.
A broker enters into an open listing with a seller but fails to give a copy of the listing contract to the owner and also fails to include a termination date. The broker then presents an offer which is accepted.
A) - The broker is entitled to the stated commission.
B) - The exclusion of a termination date does not matter.
C) - Both (a) and (b) are correct.
D) - Neither (a) nor (b) are correct.
C) - Both (a) and (b) are correct.
Answer: C—Unlike an exclusive listing, an open listing need not contain a definite termination date. The listing terminates after a reasonable time, usually whatever is customary in the community. All other concurrent open listings are automatically cancelled by the sale. It is not necessary for the broker to give the owner a copy of the open listing at the time of signing.
Under an exclusive agency listing, a broker advertises a home for sale. The owner sells the home prior to the expiration of the listing. The broker is entitled to:
A) - nothing.
B) - the full commission.
C) - half of the commission.
D) - expenses only.
A) - nothing.
Answer: A—Since the listing was an Exclusive Agency Listing, the seller may sell the property him/herself.
The broker’s promise to use diligence in finding a buyer:
A) - makes the listing a unilateral contract.
B) - makes the listing voidable by the owner.
C) - makes the listing a bilateral contract.
D) - None of the above
C) - makes the listing a bilateral contract.
Answer: C—A bilateral contract is a contract in which each party promises to perform an act in exchange for the other party’s promise to perform. An exclusive listing is an example of a bilateral contract with the broker agreeing to use his/her best efforts (diligence) to locate a ready, willing and able buyer, and the seller promising to pay the broker a commission if the property is sold.
You enter into a contract with a person not knowing he was judicially declared incompetent. The incompetence of one of the parties to this agreement would make the contract:
A) - void.
B) - voidable.
C) - enforceable.
D) - valid.
A) - void.
Answer: A—Since one of the parties to the agreement was incompetent, the contract is void.
A broker accepts an exclusive authorization and right to sell listing from a corporation. During the listing term, all of the officers of the corporation die. In this case:
A) - the listing is automatically terminated.
B) - the listing remains in full effect.
C) - the listing must be acknowledged by the newly appointed officers.
D) - the listing must be signed by the corporation’s board of directors.
B) - the listing remains in full effect.
Answer: B—One of the main characteristics of a corporation is its perpetual existence, that is corporations never die and only cease to exist when properly dissolved.
A parcel of vacant land is listed for $100,000, requiring 20% down with the seller to carry back the balance. The broker brings in a full-price cash offer, but the owner refuses. The broker is entitled to:
A) - half of the commission.
B) - the full commission.
C) - a commission as a percent of the down payment.
D) - nothing.
D) - nothing.
Answer: D—Since the offer does not meet the exact terms of the listing, the broker is not entitled to any commission.
A broker has a combination of a listing and an option. She exercises the option without disclosing that she already has a buyer at a higher price. The broker:
A) - is guilty of fraud.
B) - has made a secret profit.
C) - created an illegal dual agency.
D) - has done nothing wrong.
B) - has made a secret profit.
Answer: B—Secret profit refers to a broker making an undisclosed profit at the seller’s expense. Brokers cannot conceal offers from buyers until after they have exercised the option. Full and fair disclosure must be given to the seller.
All of the following would be required to be in writing EXCEPT:
A) - sale of a vacant lot.
B) - sale of a personal residence.
C) - sale of a condominium.
D) - None of the above
D) - None of the above
Answer: D—The Statute of Frauds generally requires that all contracts for the sale of land or any interest herein be in writing.
A listing broker agrees verbally to split a commission with a selling broker. The listing broker now refuses to do so. The selling broker should:
A) - notify the Department of Real Estate.
B) - sue the listing broker.
C) - contact the MLS.
D) - do nothing since the agreement was verbal.
B) - sue the listing broker.
Answer: B—A verbal agreement between two brokers to split a commission is enforceable. The selling broker’s recourse would be to sue the listing broker. The “selling broker” is the one who brings in the offer.
A family rents a house from January 1st to June 30th. This is considered a(n):
A) - periodic tenancy.
B) - tenancy at sufferance.
C) - estate for years.
D) - tenancy at will.
C) - estate for years.
Answer: C—An estate for years is a leasehold created by landlord and tenant for a particular period of time. The period of time could be a fixed number of years, months, weeks, or even days. An estate for years always will have a definite termination date.
Thinking that he is acting properly regarding the safety clause in a listing, a broker notifies the owner verbally of a prospective buyer with whom he negotiated. The day after the listing expires, the buyer purchases the property. Which of the following is correct?
A) - The broker is entitled to a commission.
B) - The broker is entitled to one half of the commission.
C) - The matter would need to go to board arbitration to be resolved.
D) - The broker is not entitled to any commission.
D) - The broker is not entitled to any commission.
Answer: D—A safety clause in a listing requires the broker to submit the names of all prospective buyers with whom he/she negotiated in writing.
The Statute of Frauds, outlines what contracts must be in writing to be enforceable through court action. Which of the following contracts would be enforceable?
A) - A verbal lease for one year or less
B) - A verbal listing to secure a loan of $1,500
C) - An exclusive listing taken orally by a broker to sell a single-family residence
D) - An oral agreement to pay a broker a commission for the negotiation of an exchange of two businesses
A) - A verbal lease for one year or less
Answer: A—The Statute of Frauds is state law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable. The Statute of Frauds generally requires that all contracts for the sale of land or any interest herein be in writing. Oral leases for a period not exceeding one year, however are generally valid and enforceable.
A person who had leased a property for three years had to move out of state before the lease period had expired. In reading the lease, there was no mention of either subleasing or assignment of the leasehold. The lessee:
A) - may sublease or assign the lease.
B) - may assign the lease only.
C) - must have the permission of the landlord to either sublease or assign the lease.
D) - the lessee may not either sublease or assign the lease.
A) - may sublease or assign the lease.
Answer: A—Failure to discuss either subleasing or assigning a lease automatically gives those rights to the lessee.
Which type of lease requires the lessee to pay a flat rent?
A) - gross lease
B) - percentage of lease
C) - sandwich lease
D) - net lease
A) - gross lease
Answer: A—Gross lease: A lease of property under which the lessee pays a fixed rent and the lessor pays the taxes, insurance, and other charges regularly incurred through ownership.
A tenant verbally agrees to lease a house for six months. The following month, the tenant notifies the owner that he has found a more desirable unit and will be moving out. The contract is:
A) - void.
B) - invalid since it was not in writing.
C) - enforceable.
D) - unenforceable.
C) - enforceable.
Answer: C—Oral leases for a period not exceeding one year are generally valid and enforceable.
