Your Daily Quiz
ANSWERS TO CONTRACT QUESTIONS
1. A. A land contract is a form of seller financing, where the seller continues to hold onto legal title until a certain portion, or in some cases all, of the purchase price is paid. The buyer would normally take possession and be responsible for the property. It can also be called an installment contract, a land installment contract or a contract for deed
2. B. A cancellation agreement is a form used to terminate a contract. In some states it may be referred to as a release (but not a release deed).
3. A. A counteroffer.
4. C. An Exclusive Authorization to Sell (also called an Exclusive Right-to-Sell) is a bilateral contract because both sides have an obligation. The agent is obligated to market the property, and if the property sells, the seller is obligated to pay a commission. The other three are all unilateral contracts, where only one-side is obligated. In an Option Contract, the seller is obligated to sell, but the buyer is not obligated to buy. In an Open Listing, the agent is not obligated to market the property, but if they bring an acceptable buyer, the seller is obligated to pay a commission. A reward does not require any one to seek the award, but does require payment if the requested task is completed.
5. B. While an oral lease would probably be unenforceable, the fact that the contract is for an illegal purpose would be the overriding factor, so the contract would be void.
6. A. Delivery and acceptance is essential to a deed. Offer and acceptance is essential to a contract.
7. A. An assignment is a transfer of obligations from one party to another. The original party is referred to as the assignor and the new party is referred to as the assignee. If the assignee defaults, both the assignor and the assignee can be held liable by the other party in the agreement. A novation (of the parties) is a substitution of a new party for one of the original parties in a contract, with the original party being free from all future liability. A novation can also be a substitution of one contract for another contract.
8. A. We have to use a little judgment here, but I would say if he leaves the farm to his rabbits, he was not of sound mind when he signed the contract.
9. C. A lease is a contract, and has the same requirements as any other contract. An acknowledgment goes along with a deed. A contract must have an offer and an acceptance (mutual agreement), consideration, legally competent parties, a legal objective or legal purpose and reality of consent (meaning that all parties have voluntarily entered into the agreement).
10. D. “Time is of the essence” means that all dates and times must be met exactly. If a deadline is missed, even for a good reason, the contract would be no good. Deadlines can be extended, but only if extended before the deadline has passed.