Deck 6: Contracts

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

Liquidated damage provisions contained in contracts are always enforceable.

Answer 3

False

Question 4

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

Question 5

A person being appointed to act under a power of attorney must be a lawyer.

Question 6

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

Question 7

Not every contract must be in writing to be enforceable.

Question 8

The amount of money damages 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 9

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

Question 10

All contracts must be in writing to be enforceable.

Question 11

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

Question 12

The amount of money damages 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 13

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

Question 14

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

Question 15

The liquidated damage provisions in a contract are generally enforceable provided they do not result in a penalty.

Question 16

A real estate contract must be in writing to be enforceable.

Question 17

Illiteracy of a party renders a contract unenforceable.

Question 18

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

Question 19

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

Question 20

A contract entered into between an adult and a minor is unenforceable by both parties.

Question 21

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

Question 22

A real estate broker can have only express authority.

Question 23

A real estate broker is not a fiduciary.

Question 24

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 25

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

Question 26

A listing agreement whereby the owner hires a broker to sell the property and the owner agrees that if the property is sold, even if through the owner's efforts, the commission is owed is known as an open listing.

Question 27

An owner's basis in his or her property is the net sales price received by the owner from the sale of the home.

Question 28

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

Question 29

An owner's basis in his or her property will always equal the owner's depreciation of the property.

Question 30

Under an exclusive listing, an owner still reserves the right to sell the real property and avoid a commission.

Question 31

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 32

Limited partners in a limited partnership must approve all contracts of the limited partnership.

Question 33

A real estate agent or broker, in order to earn a commission, must be the procuring cause of the sale.

Question 34

Under an exclusive listing, an owner hires only one broker to assist in the sale of the real property.

Question 35

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

Question 36

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

Question 37

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

Question 38

A listing agreement whereby an owner hires only one broker to assist in selling the property and the owner agrees that if the real property is sold, even if through the owner's efforts, a commission is owed is known as an exclusive right-to-sell listing.

Question 39

An open listing entered into between an owner and an agent precludes the owner from selling his or her own property.

Question 40

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

Question 41

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

A) Partnership
B) Executor
C) Corporation
D) Mental incompetent

Question 42

Alan offers to sell his home to Jenna for $200,000. Jenna responds to Alan that she would buy the home if he would have the home painted and a new roof installed, all at his expense. Has Jenna accepted Alan's offer? Explain your answer.

Question 43

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

A) the equivalent of 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 injured party.

Question 44

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 45

Which of the following persons would a power of attorney most likely be given to?

A) Trustee
B) Minor
C) Agent
D) Mental incompetent

Question 46

Seller enters into a contract with purchaser to sell real property for $100,000. 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.
C) $10,000.
D) $90,000.

Question 47

Which of the following is generally nota 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 48

Seller offers to sell their home to a purchaser for $70,000. The purchaser responds that he will buy the home for $60,000. The seller refuses the purchaser's offer to buy for $60,000. After that refusal, the purchaser offers to buy the home for $70,000. At this time, what is the legal relationship of the parties?

A) There is a contract to purchase the home for $70,000.
B) There is an offer to purchase the home for $70,000.
C) None of the above.
D) All of the above.

Question 49

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

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

Question 50

Pat Purchaser purchased a home from Sonja Seller. Sonja represented that the basement did not leak. Pat discovered a few months after the purchase and a hard rain that the basement did leak. Pat hired a building inspector to examine the basement and was told that it had been leaking for some time and it would be expensive to fix the problem. Pat did nothing about it at the time. A year later, after another hard rain, Pat sued Sonja and demanded resc ission of the sale, return of her purchase money, and reimbursement for the expense of a deck that Pat built on the home following the purchase. Will Pat be able to rescind the sale? Explain your answer.

Question 51

A section of a contract that provides that, in the event of default, the purchaser is entitled to $10,000 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 52

Susan gives her daughter Kathy a power of attorney to sell a lakefront lot for $100,000.00.
Pursuant to the power of attorney, Kathy contracts for and sells the lot. The buyer makes out a check for the lot in Kathy's name. Kathy cashes the check and keeps the money. Has Kathy breached any duty to Susan?

Question 53

Which of the following cannot be added to an owner's basis in a home?

A) The cost of putting a new roof on the home
B) The cost of building a garage
C) The cost of having the gutters cleared of leaves
D) The cost of adding an additional bathroom

Question 54

Which of the following is most likely nota defense to the enforceability of a contract?

A) Illiteracy
B) Mental incompetency
C) Violation of trust instrument
D) Infancy

Question 55

Seller and purchaser enter into a contract to purchase real property at a fair market value of $100,000. Seller refuses to perform the contract, and at the time of seller's default, the fair market value of the property is $110,000. The purchaser can recover from the seller the following money damages:

A) $100,000.
B) 0.
C) $10,000.
D) $110,000.

Question 56

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

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

Question 57

Which of the following is/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 58

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

A) contract is terminated and 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 lost profits.
D) none of the above.

Question 59

A listing agreement whereby an owner hires only one broker or agent to assist in selling the real property and the owner agrees that if the real property is sold, even if through the owner's effort, a commission is earned by the broker or agent is known as a(n):

A) open listing.
B) exclusive-right-to-sell listing.
C) multiple listing.
D) none of the above.