Chapter 5 - Contracts

Question 1

This type of contract is expressed in words, either oral or written.

Answer 1

Express contract; listings, purchase agreements and leases.

Question 2

Bilateral contract is promise for a ______.

Answer 2

promise

Question 3

Unilateral contract is a promise for an ____.

Answer 3

act

Question 4

An exclusive listing contract is a _____, _____, _______ contract.

Answer 4

expressed, bilateral, executory contract

Question 5

4-5 elements of a contract; performance and money don’t count as part of it.

Answer 5

1. capacity
2. mutual consent
3. legality
4. consideration
5. (in real estate) written; due to statute of frauds

Question 6

A buyer can withdraw his or her offer at any time _____ to receiving communication (in writing, personally, or mail) of its acceptance and receive a refund of the money deposited.

Answer 6

prior to receiving communication

Question 7

An illusory contract is one in which the terms are not definite and certain, therefore the contract is __________.

Answer 7

unenforceable

Question 8

If a contract is signed under duress, it is _______.

Answer 8

voidable

Question 9

________ ___________ in a contract is anything of value given by one party given by one party to another party to make the agreement binding.

Answer 9

Valuable consideration; anything adequate, valuable, good and sufficient related to consideration.

Question 10

______ of ______ requires most real estate contracts to be in writing.

Answer 10

Statute of Frauds

Question 11

Any contract (such as personal property contracts, aka leases) that can’t be performed within _______ from the date of signing must be in writing.

Answer 11

a year

Question 12

An _________ is the transfer of a person’s right in a contract to another party.

Answer 12

Assignment; any contract, unless it calls for some personal service, can be assigned if the contract does not state otherwise.

Question 13

A ___________ is the substitution or exchange (by mutual agreement of the parties) of a new obligation or contract for an existing one with intent to cancel the old contract.

Answer 13

Novation; the substitution, by agreement, of a new contract for an old one.

Question 14

_________ is the canceling of an offer to contract by the original offeror.

Answer 14

Revocation.

Question 15

When a contract is _________ rescinded, the deposit must be returned to the buyer immediately.

Answer 15

mutually rescinded

Question 16

Contract can be cancelled due to Operation of Law (according to Statutes)

Answer 16

1. illegality
2. impossibility of performance
3. rejection by bankruptcy
4. failure of key contingency
5. statute of limitations

Question 17

What must/can the seller do to a buy who entered a legally binding purchase contract, but backed out within a week.

Answer 17

1. sue buyer for money damages
2. return deposit to the buyer
3. must attempt to resell ASAP to minimize damages

Question 18

What are the 4 remedies for a breach?

Answer 18

1. acceptance of breach
2. unilateral rescission
3. action for dollar damages
4. possible action for specific performance

Question 19

acceptance of a breach

Answer 19

no legal action taken

Question 20

In a _________ _________ breach, the wrong party 1. discloses the wrong and 2. restores everything of value to the offending party.

Answer 20

unilateral rescission

Question 21

A __________ __________ __________ sets, in ADVANCE, a specified amount of money as compensation if there is a breach.

Answer 21

Liquidated damages agreement

Question 22

The currently award for liquidated damages on a purchase agreement form is a maximum of __% (by law) of the home purchased price.

Answer 22

3%

Question 23

_______ ________ means that the party causing the breach is, through court action, forced to perform the terms of the contract.

Answer 23

Specific performance

Question 24

A promissory note secured by a deed of trust, a postdated check, or an unsecured promissory note could deb used by a buyer as an earnest money deposit in _______ real property.

Answer 24

Purchasing

Question 25

The ______ _________ is the most important contract in the real estate field!

Answer 25

purchase agreement; previously known as the deposit receipt; full name: California Residential Purchase Agreement and Joint Escrow Instructions

Question 26

What does the purchase agreement include?

Answer 26

- percentage of commission - can fill it in with pen or just type it - has three copies (aster, buyer's and seller's)

Question 27

What happens when the liquidated damages clause is initialed by both the buyer and the seller, and the buyer defaults? It's a CAR Purchase Agreement form.

Answer 27

- seller may retain the deposit (up to three percent of the sale price) - split 50/50 between seller and broker.

Question 28

If a seller rescinds a contract because a buyer defaults, the earnest money deposit must be returned to the buyer if the parties DID/DID NOT initial the liquidated damages clause in the purchase contract.

Answer 28

DID NOT

Question 29

Convents are ______.

Answer 29

promises between the parties to a contract.

Question 30

The _______ ________ _________ form is used as an addendum to either the Residential Purchase Agreement, another offer form, or the counter offer form.

Answer 30

Purchase Agreement Addendum

Question 31

What is errors and omissions insurance for?

Answer 31

It's the liability insurance (usually paid for by the salesperson at close of escrow) that brokers and salespeople should carry in order to pay for any costly lawsuits.

Question 32

In a counter offer, the offer becomes the ________.

Answer 32

Offeror

Question 33

If an agent fails to disclose known defects in a property to the buyer, the buyer can file civil action against the agent within _____ years.

Answer 33

2 years

Question 34

The _____ is primarily responsible for disclosing the presence of Mello-Roos tax liens or other assessments.

Answer 34

seller

Question 35

Which six zones does the Natural Hazard Disclosure Statement cover?

Answer 35

1. Seismic 2. Earthquake Fault 3. Wildland Fire 4. State Responsibility 5. Flood 6. Damn Inundation

Question 36

In addition to disclosing any known environmental hazards on the TDS, the seller and his/her agent should provide the buyer with the pamphlet entitled "_________ ________: _ ____ ___ _________, _______, ______, and _____," which includes sections on asbestos, lead, mold, formaldehyde, and radon. The Environmental Hazards Guide does NOT include fire, flood, or earthquake information.

Answer 36

Environmental Hazards: a Guide for Homeowners, Buyers, Landlords, and Tenants

Question 37

Supplemental Statutory and Contractual Disclosures are usually used for things not provided for in the Real Estate Transfer Disclosure Statement, such as ....

Answer 37

insurance claims affecting the property

Question 38

An ______ is a right to purchase a property upon specified terms within a specified time period, which is granted in exchange for money.

Answer 38

Option Optioner: seller Optionee: potential buyer; who can transfer his share