CHAPTER 7 CONTRACTS QUIZ

Question 1

If there has been full performance of a real estate contract, what is the end result?

Answer 1

The seller will have the purchase price and the buyer will have title to the real estate.

Question 2

When do damages usually occur in a real estate closing?

Answer 2

When the real estate contract is breached.

Question 3

Sally enters into a contract with Brad to sell her real estate. The purchase price is $100,000. But Brad pays only $50,000 and promises to pay the other $50,000 10 days after the closing. Sally conveys the property, but Brad does not make the payment. What kind of damages is she entitled to?

Answer 3

Compensatory damages for the balance of the purchase price.

Question 4

Under what circumstances could a buyer be entitled to compensatory damages?

Answer 4

If there is damage to the property that is discovered after the closing.

Question 5

Alex and Miller enter into a contract for Miller to buy Alex’s house. The contract allows for Miller to obtain a mortgage at 5% interest. However, after due effort, Miller can only get a mortgage at 6% interest. He backs out of the contract. Does Alex have a claim for damages against Miller?

Answer 5

Likely not. This is a mortgage contingency.

Question 6

Eddie bought real estate from Gil. Eddie did an inspection of the property and Gil provided a list of disclosures. But a week after closing when Eddie moved into the property, he found that under a carpet was a huge crack in the floor. What type of damages can Eddie claim?

Answer 6

Compensatory damages

Compensatory damages are awarded in civil court cases where loss has occurred as a result of the negligence or unlawful conduct of another party.

Question 7

What would trigger specific performance?

Answer 7

A court order.

Specific performance can only be obtained through the court system.

Question 8

A seller is selling his real estate to a buyer. The purchase price is $200,000. The buyer gives the seller $100,000 with the promise to give the rest to the seller the next day. The seller gives the buyer the deed. However, the buyer never makes the second payment. What remedy is available to the seller?

Answer 8

Specific performance, getting an order from the court, forcing the buyer to pay the rest of the money.

Question 9

What is partial performance of a contract?

Answer 9

When one or both parties do not complete all of the requirements of the contract.

Question 10

What do we call performance that is not full performance?

Answer 10

Partial performance.

Question 11

Stan is selling his real estate to Brian pursuant to a real estate contract. Brian’s attorney examines the title and finds that there is an easement on the property that will not allow it to be sold and used for the purpose that Brian needs. The contract allows Brian to back out of the contract if there is a significant title problem. What remedy is available to the seller?

Answer 11

None. The contract will be canceled for impossibility and contingency.

Question 12

Jim is a seller on a real estate contract, and Bill is the buyer. Jim receives the purchase price from Bill, and Jim hands Bill a deed for the real estate, but Jim did not sign it. What remedy is available to Bill?

Answer 12

Specific performance to sign the deed. The parties clearly wanted the transaction to go forward

Question 13

What is the best practice for a licensee when a real estate transaction runs into problems?

Answer 13

Advise the parties to seek an attorney and step away from the transaction.

Question 14

Can a real estate attorney draft a real estate contract?

Answer 14

Yes. Attorneys can draft any type of contract.

Question 15

If a licensee provides legal advice to their client, they may be guilty of…?

Answer 15

The unauthorized practice of law.

Question 16

What must happen for a contract to be binding?

Answer 16

Both sides have to agree to all of the terms.

Question 17

What usually comes first in the real estate contract negotiation process?

Answer 17

The buyer makes an offer to the seller

Question 18

What does the buyer usually require the seller to do before closing?

Answer 18

Pay off liens.

Question 19

Gary is selling his real estate. There are numerous liens on the property because Gary is really bad about paying his debts. Deb wants to buy the property and demands that Gary pay off the liens before title passes. What is this called?

Answer 19

Condition precedent.

Question 20

What is extrinsic evidence?

Answer 20

Evidence outside the contract itself.

Question 21

What must be given in exchange for a contract being signed?

Answer 21

Something of value.

Question 22

A buyer and seller enter into a real estate contract. Three days before closing, the house burns down. What is this called?

Answer 22

Impossibility of performance.

Question 23

What is usually included with the purchase price in the real estate contract?

Answer 23

The payment terms, whether cash or mortgage.

Question 24

What is an example of a buyer default?

Answer 24

The buyer goes into bankruptcy.

Question 25

If the buyer on a real estate contract refuses to close for no valid reason allowed by the contract, what remedy is available to the seller?

Answer 25

The seller gets to keep the earnest money as damages.

This is considered a breach of contract, and the seller will be entitled to the buyer’s earnest money.

Question 26

What is the result when a contract is terminated?

Answer 26

The contract is void and has no legal affect.

Question 27

What is the name of the process when a contract is canceled by both parties?

Answer 27

Termination by mutual agreement.

Question 28

How long can a party wait to sue for breach of contract?

Answer 28

Up until the statute of limitations.

Question 29

Jim is selling his real estate to Wayne. The contract allows Wayne to have a 30 day inspection period to include a physical inspection of the real estate. Jim will not let Wayne go onto the real estate, but demands that Wayne complete the closing and pay anyway. Wayne files a lawsuit against Jim. What is the most likely result?

Answer 29

The court will cancel the contract by operation of law.