Real Estate Fundamentals - Chapter 9: Contracts

1. A legal agreement between 2 or more parties is known as a contract.

True

False

A legal agreement between two or more parties is known as a contract. This means that when two or more parties come to an agreement and fulfill certain legal requirements, they create a binding contract. Contracts are used in various situations, such as business transactions, employment agreements, or even personal arrangements. They outline the rights and obligations of each party involved and provide a legal framework for resolving disputes or enforcing the terms of the agreement. Therefore, the statement "A legal agreement between 2 or more parties is known as a contract" is true.

Explanation

A legal agreement between two or more parties is known as a contract. This means that when two or more parties come to an agreement and fulfill certain legal requirements, they create a binding contract. Contracts are used in various situations, such as business transactions, employment agreements, or even personal arrangements. They outline the rights and obligations of each party involved and provide a legal framework for resolving disputes or enforcing the terms of the agreement. Therefore, the statement "A legal agreement between 2 or more parties is known as a contract" is true.

2. A "bilateral contract" is an agreement between 2 parties in which both parties make promises to do something and each party can enforce the promises of the other party.

True

False

A bilateral contract refers to an agreement between two parties where both parties make promises to perform certain actions. In this type of contract, each party has the right to enforce the promises made by the other party. This means that if one party fails to fulfill their promise, the other party can legally hold them accountable and seek remedies. Therefore, the given statement that a bilateral contract is an agreement between two parties where both parties can enforce each other's promises is true.

Explanation

A bilateral contract refers to an agreement between two parties where both parties make promises to perform certain actions. In this type of contract, each party has the right to enforce the promises made by the other party. This means that if one party fails to fulfill their promise, the other party can legally hold them accountable and seek remedies. Therefore, the given statement that a bilateral contract is an agreement between two parties where both parties can enforce each other's promises is true.

3. If the seller defaults on an agreement of sale, the purchaser has the right to file a lawsuit to make the seller honor the terms of the agreement.

True

False

Yes. This is called a suit for specific performance.

Explanation

Yes. This is called a suit for specific performance.

4. A way to distinguish a property from all others can be through either a property address, tax parcel number, deed book and page number or perhaps a legal land description.

True

False

This statement is true because a property can be distinguished from others using various identifiers such as its address, tax parcel number, deed book and page number, or a legal land description. These identifiers provide unique information about the property that sets it apart from all others.

Explanation

This statement is true because a property can be distinguished from others using various identifiers such as its address, tax parcel number, deed book and page number, or a legal land description. These identifiers provide unique information about the property that sets it apart from all others.

5. The "default" term of a contract is also called "breach of contract".

True

False

The "default" term of a contract refers to a situation where one party fails to fulfill their obligations as outlined in the contract. This is commonly known as a "breach of contract". Therefore, the statement that the "default" term of a contract is also called "breach of contract" is true.

Explanation

The "default" term of a contract refers to a situation where one party fails to fulfill their obligations as outlined in the contract. This is commonly known as a "breach of contract". Therefore, the statement that the "default" term of a contract is also called "breach of contract" is true.

6. According to the "parole evidence rule" oral statements cannot be used to change or contradict terms of a clearly written contract.

True

False

The "parole evidence rule" is a legal principle that states that oral statements cannot be used to modify or contradict the terms of a written contract that is clear and unambiguous. This means that if a contract is clearly written and contains all the necessary terms, any oral statements made before or during the formation of the contract cannot be used to alter or contradict those terms. Therefore, the answer "True" is correct as it accurately reflects the principle of the parole evidence rule.

Explanation

The "parole evidence rule" is a legal principle that states that oral statements cannot be used to modify or contradict the terms of a written contract that is clear and unambiguous. This means that if a contract is clearly written and contains all the necessary terms, any oral statements made before or during the formation of the contract cannot be used to alter or contradict those terms. Therefore, the answer "True" is correct as it accurately reflects the principle of the parole evidence rule.

7. As it related to real estate, the contract term "assign" means to transfer one's interest in property over to another party.

True

False

The statement is true because in real estate, the term "assign" refers to the transfer of one's interest in a property to another party. This means that the original party gives up their rights and obligations related to the property and transfers them to a new party. This can be done through a formal assignment agreement, where the new party assumes all the rights and responsibilities of the original party in relation to the property.

Explanation

The statement is true because in real estate, the term "assign" refers to the transfer of one's interest in a property to another party. This means that the original party gives up their rights and obligations related to the property and transfers them to a new party. This can be done through a formal assignment agreement, where the new party assumes all the rights and responsibilities of the original party in relation to the property.

8. An "executed contract" is one in which the parties have entered into the contract and are in process of fulfilling the contract but have not yet completed all the terms and conditions.

True

False

This is a description of an executory contract.

Explanation

This is a description of an executory contract.

9. The sales contract is more commonly known as "The Complete and Final Contract".

True

False

It is known as "The Agreement of Sale".

Explanation

It is known as "The Agreement of Sale".

10. A "unilateral contract" is one in which both parties promises to do something in satisfying the contract.

True

False

A "unilateral contract" is an agreement in which one party promises to do something only if the other party acts in a certain way.

Explanation

A "unilateral contract" is an agreement in which one party promises to do something only if the other party acts in a certain way.

11. A "novation" is used primarily by lending institutions in their mortgage agreements that allows lenders to sell the mortgages obtained to a purchaser in the secondary market.

True

False

A novation is a new contract that is used to extinguish and simultaneously replace one or more persons or conditions in an old contract.

Explanation

A novation is a new contract that is used to extinguish and simultaneously replace one or more persons or conditions in an old contract.

12. An "express contract" is an agreement that is carried out through the actions of a party.

True

False

An express contract is an agreement in which the terms and conditions are clearly stated in words, either orally or in writing.

Explanation

An express contract is an agreement in which the terms and conditions are clearly stated in words, either orally or in writing.

13. To be legal and enforceable, real estate contracts must be completed by competent parties. This means that the two or more parties must be of legal age (21 in PA) and not intoxicated through alcohol or drugs or insane to the point of mental incapacity and having the ability to enter into a contract.

True

False

All factors are true EXCEPT legal age in PA is 18, not 21.

Explanation

All factors are true EXCEPT legal age in PA is 18, not 21.

14. Pennsylvania and all other states have a law known as The Statute of Laws that requires all contracts regarding the sale of real estate and all documents regarding the transfer of title to real property, to be written and signed.

True

False

The law is known as The Statute of Frauds.

Explanation

The law is known as The Statute of Frauds.

15. A contract is "valid" (meaning legal and enforceable) when it contains the signatures of all the parties to the contract.

True

False

A contract is valid when it contains all the necessary components.

Explanation

A contract is valid when it contains all the necessary components.