Question 1

Under common law, no party to a contract is entitled to attorney's fees unless the contract so provides.

Accepted Answer

Under common law, the "American Rule" applies, which means that each party bears its own attorney's fees unless a statute or contract specifically provides otherwise.

Question 2

Under a contract for sale and purchase, if the buyer defaults:

Accepted Answer

If the buyer defaults, they typically risk losing only the deposit paid, as it is often considered liquidated damages for the breach. The seller, on the other hand, may seek additional damages beyond the deposit.

Question 3

Under federal law, a sale is considered an installment sale if at least one payment under the contract is made after the close of the taxable year of sale.

Accepted Answer

Under federal tax law, specifically the Internal Revenue Code, a sale is classified as an installment sale if at least one payment is received after the tax year in which the sale occurs. This allows the seller to spread the recognition of income over the period payments are received, rather than recognizing all income in the year of sale.

Question 4

A lease of real property does not have to be in writing if the lease term is one year or less.

Accepted Answer

Under the Statute of Frauds, leases for a term of one year or less do not need to be in writing to be enforceable; they can be oral agreements.

Question 5

A contract in which the seller gives a potential buyer the exclusive right within a specified, limited time to purchase real property is called ___.

Accepted Answer

The answer of A contract in which the seller gives...

Question 6

The following is not a boilerplate provision of a contract:

Accepted Answer

A legal description provision is not considered a boilerplate provision. Boilerplate provisions are standard clauses included in most contracts, such as governing law and severability, that do not pertain to the specific subject matter of the contract but outline general practices for legal interpretation and enforcement. A legal description provision, which details the precise boundaries and description of real property, is specific to contracts dealing with real estate and not a standard inclusion in all contracts.

Question 7

Explain the way an option contract works.

Accepted Answer

The answer of Explain the way an option contract works....

Question 8

The date upon which the contract becomes legally binding on all parties is called the ___.

Accepted Answer

The answer of The date upon which the contract becomes...

Question 9

In a sale subject to an existing mortgage, the buyer becomes responsible for the seller's payments under the existing mortgage, and the buyer is primarily liable under the mortgage note.

Accepted Answer

In a sale subject to an existing mortgage, the original borrower (seller) remains primarily liable for the mortgage payments unless the lender agrees to release them and substitute the buyer as the primary debtor. The buyer agrees to make payments but is not directly liable to the lender under the original mortgage note.

Question 10

In drafting a contract for sale and purchase, what do most buyers want in the contract?

Accepted Answer

The answer of In drafting a contract for sale and...

Question 11

The financing method in which the buyer assumes personal responsibility for payment of the seller's existing mortgage loan and in which the buyer is primarily liable for any deficiency judgments is called     .

Accepted Answer

The answer of The financing method in which the buyer...

Question 12

Explain the ways a purchase of real property may be financed.

Accepted Answer

The answer of Explain the ways a purchase of real...

Question 13

In drafting a contract for sale and purchase, what do most sellers want in the contract?

Accepted Answer

The answer of In drafting a contract for sale and...

Question 14

In an option contract:

Accepted Answer

In an option contract, the money the potential buyer pays is not considered a deposit but rather an option fee. This fee gives the buyer the right, but not the obligation, to purchase the property at a later date.

Question 15

The ___ is a state statute indication that contracts must be in writing and signed by the party to be charged in order to be legally enforceable.

Accepted Answer

The answer of The ___ is a state statute indication...

Question 16

In order for any valid contract to exist, these elements must be present:

Accepted Answer

For a contract to be valid, it must include mutual assent (agreement by both parties), legal capacity of the parties (ability to enter into a contract), consideration (something of value exchanged), and a legal purpose (the contract's aim must be lawful). A writing is not always required for a contract to be valid, as many contracts can be oral or implied by conduct.

Question 17

A purchase money mortgage:

Accepted Answer

The answer of A purchase money mortgage:
...

Question 18

If the parties to a contract for sale and purchase are using a standard form contract and wish to modify it, what should they do?

Accepted Answer

The answer of If the parties to a contract for...

Question 19

An escrow agent must open an individual account for each earnest money deposit.

Accepted Answer

An escrow agent does not necessarily have to open an individual account for each earnest money deposit; they can maintain a single escrow account where multiple earnest money deposits are held, as long as the funds are properly accounted for and segregated within the account records.

Question 20

___is something of value that the parties exchange as part of their bargain.

Accepted Answer

The answer of ___is something of value that the parties...

Quiz 7: The Basic Real Estate Contract