UPDATED 2024 Law of Contracts EXAM

A buyer defaults on a contract and the seller chooses to receive the earnest money. This is an example of: - ANSWER Liquidated damages In a residential lease with a "right of first refusal" provision: - ANSWER The tenant has the right to match or better any offer the landlord receives to prevent the property from being sold to someone else Bill is the buyer purchasing a property from Sally. All contingencies have been met and the parties are ready to close. One day prior to closing, Sally announces that she has changed her mind and is going to keep the property. Bill is determined to complete the purchase and acquire the property. The only default remedy in the contract that could result in Bill acquiring the property is___________________________. - ANSWER Specific Performance Elmer Fleckenfleck, an agent with After Hours Realty, was preparing a contract. The seller told Elmer that he wanted to stay in the property for at least a week after closing. Elmer said that would be no problem and entered the following text to Paragraph 11: "Seller and Buyer agree that Seller will remain in the Property for 7 days after closing and funding." In this case, Elmer has: - ANSWER Engaged in the unlawful practice of law Texas Veteran's Housing Assistance Program loans can be: - ANSWER (a) FHA (b) VA (c) Conventional (d) Any of the above D The four economic characteristics of land are: scarcity, fixity, situs and ______ - ANSWER Modification Joe is an agent at Tried and True Realty. He gets a $150,000 offer on a property that is listed for $199,500. In a recent phone conversation, the seller told Joe he would accept no less than $185,000 for the property. Knowing the seller's "bottom line," what should Joe do with the offe - ANSWER Joe should present the offer to the seller An abstract of title is: - ANSWER A complete written history of title The Buyer and Seller Temporary Residential Lease forms are good for any period up to: - ANSWER 90 days An option is: - ANSWER unilateral contract The Special Provisions paragraph of the contract allows license holders to insert: - ANSWER (a) Factual business details (b) Statements not addressed in the contract (c) Information for which there is no TREC promulgated addendum, lease or mandatory form (d) All of the above Correct answer: d A seller is going to continue to occupy a property for two days after closing. In this case, the parties should use the Buyer's Temporary Residential Lease form. - ANSWER false A contract in which only one party is obligated to perform is a________ contract. - ANSWER Unilateral For tax prorations - ANSWER (a) If taxes are not paid at or prior to closing the buyer shall pay for the current year (b) If taxes for the current year vary from the amount prorated at closing, the parties shall adjust the prorations when tax statements for the current year are available (c) The tax proration may be calculated taking into consideration any change in the exemptions that will affect the current year's taxes (d) All of the above D ________ is the right of the government to regulate and control the way land is used. - ANSWER Police power A counteroffer is: - ANSWER a) A rejection (b) A new offer (c) Able to be withdrawn prior to acceptance (d) All of the above D A seller of coastal property abutting tidally influenced water must provide the ________ - ANSWER Notice Regarding Coastal Area Property If a broker receives more than one offer on a property: - ANSWER All must be presented to the seller unless the seller has instructed the broker otherwise in writing RESPA prohibits ________, which is considered an abusive practice. - ANSWER kickbacks A claim, lien, charge, or liability attached to and binding real property is a(n) ________. - ANSWER Encumbrance A(n) ________ is a provision in a contract that requires that a certain act or event happens in order for the contract to be binding on the party. - ANSWER Contingency At closing, the contract is: - ANSWER Fully executed FHA loans include two mortgage insurance premiums that must be paid by the borrower. They are the: - ANSWER UFMIP and Annual Premium ________ are changes that are made to the original contract, such as changes to the closing date or changes to the sales price, down payment and/or the amount financed. - ANSWER Amendments According to the Deceptive Trade Practices Act (DTPA), brokerage falls under the category of ________. - ANSWER Services The five essential elements of a valid and enforceable contract are, competent parties, offer and acceptance, legal purpose, in writing and ________. - ANSWER consideration ________ law is a body of law based on "common sense" and local custom. - ANSWER common law Which kind of rights extend above the surface of property without limitation? - ANSWER air rights A(n) ________ to a contract is an attachment that adds or further describes the rights and duties of the parties. - ANSWER addendum . ________ is the legal procedure whereby secured property may be sold to satisfy a borrower's unpaid promissory note. - ANSWER Foreclosure The SAFE Act mandated the term ________. - ANSWER Residential Mortgage Loan Originator A(n) ________ occurs when a new contract is substituted for an existing one. - ANSWER novation A(n) ________ is a business venture that is owned by one individual. - ANSWER sole proprietorship . A(n) ________ is an agreement between two or more parties to do something or to refrain from doing something. - ANSWER contract If a property violates zoning, the owners must request a(n) ________. - ANSWER variance A(n) ________ is a listing in which the real estate broker's commission is the difference between the minimum net established by the seller and the price that the buyer is willing to pay. - ANSWER net listing ________ of an offer means that the accepting party does so with no change to the contract whatsoever. - ANSWER Acceptance The ________ ensures that all consumers are given an equal chance to obtain credit. - ANSWER Equal Credit Opportunity Act The formal judicial proceeding to prove the validity of a will and to distribute the assets of a decedent's estate is calle - ANSWER probate A ________ is a deed with no guarantees or warranties. - ANSWER Quitclaim deed Mortgage loan originators can be broken down into three categories: mortgage bankers, mortgage brokers and ________ - ANSWER Correspondent lenders A ________ is the borrower's unconditional promise to repay the lender. - ANSWER promissory note A "Section 502 Loan" is insured by the ________. - ANSWER USDA ________ is evidence an individual has of his or her right to possess land. - ANSWER title A(n) ________ mortgage covers more than one piece of property. - ANSWER blanket Real property conveyed by will is called a ________. - ANSWER devise An offer may be withdrawn at any time prior to its acceptance by the offeree - ANSWER true The four categories of leasehold estates are: estate for years, tenancy at sufferance, tenancy at will and ________. - ANSWER Periodic tenancy Which of the following is a physical characteristic of land? - ANSWER Indestructability Which disclosure is provided to comply with federal requirements for properties built before 1978? - ANSWER lead based paint disclosure An offer by a prospective purchaser can be terminated prior to acceptance due to: - ANSWER (a) expiration of a specified time period (b) bankruptcy of either party (c) a change in the law that renders the contract illegal (d) all of the above