Contract Law Essentials Quiz

A formal agreement between a buyer and seller outlining the terms of a real estate transaction.

A deposit made by the buyer to show their commitment to the purchase. It is usually held in escrow until the deal closes.

A contractual right that allows a buyer to purchase a property at a specific price within a given time frame. It's a period for exclusivity.

Contracts that have not yet been fully performed by all parties.

Contracts where all the terms have been fulfilled by all parties.

Agreements where both parties have obligations and rights.

A document added to the original contract before signing, clarifying or adding terms.

A document used to modify a contract after it has been signed by both parties.

A situation where one or both parties fail to fulfill their duties outlined in the contract.

A legal remedy where the contract is canceled, and parties return to their original positions before the agreement.

A type of rescission where one party decides to cancel the contract and informs the other party.

A type of rescission where both parties agree to terminate the contract.

A type of financial compensation for damages related to a breach of contract, predetermined in the contract.

Financial compensation awarded to the injured party for actual financial losses caused by a breach of contract.

A form of punishment awarded to deter similar behavior in the future and penalize the party who breached the contract.

A pre-printed document commonly used for residential real estate transactions.

Pennsylvania's Real Estate Commission mandates all contracts to be in writing.

Licensed real estate agents in Pennsylvania are allowed to fill in blanks in pre-printed sales contracts.

Real estate agents are not lawyers and should not provide legal advice.

Pennsylvania's Plain Language Consumer Contract Act (1993) requires contracts to be written in clear and easy-to-understand language.

Avoid using jargon, technical terms, and complex sentence structures.

Legal documents that are exempt from disclosure requirements, including deeds, mortgages, and insurance policies.

A formal agreement outlining the terms of a real estate transaction between a buyer and seller.

A legal requirement for agreements of sale in Pennsylvania, specifying that a broker's role and involvement in the transaction be clearly stated.

A provision in the agreement of sale requiring that money received by the broker on account of the sale be deposited into a separate account.

A statement in the agreement of sale informing buyers about the Real Estate Recovery Fund, which protects consumers in case of broker misconduct.

A statement in the agreement of sale mentioning that access to a public road may require a permit from the Department of Transportation.

Details about the mortgage, including type, principal, interest rate, term, deadline, and broker's assistance. Included if the sale is contingent on financing.

A provision that relieves the seller from responsibility for defects in the property, requiring the buyer to sign a release at settlement.

A provision allowing the builder-seller to make changes to the building specifications before the sale is finalized.

Clauses within a purchase agreement that are essential for both parties, outlining the specific terms of the agreement.

Recognizing the individual nature of each contract and respecting the unique details negotiated by the parties.

Capitalized words in contracts have specific meanings defined within the document.

The first clause, establishing the agreement to buy and sell the property described in the document.

Terms with specific definitions, denoted by quotation marks, defining the parties and concepts within the contract.

A clause in a purchase agreement that clearly identifies the property being sold, ensuring it's distinct from any other property.

A legally recognized and detailed description of a property that sets it apart from all others, often using official land records.

The seller's promise to deliver a clear and unburdened title to the buyer at closing, ensuring the buyer owns the property without significant problems.

A formal document that proves legal ownership of a property and transfers ownership rights.

The abstract concept of ownership rights to a specific piece of real property, meaning the owner has the right to possess, use, and sell it.

A title free from significant encumbrances or defects, allowing the buyer to enjoy and sell the property without major problems.

Any claim or limitation on a property's ownership, potentially affecting its value or use, such as easements, liens, or restrictions.

A formal legal process where the buyer examines the title evidence, ensuring it is free from any significant problems before closing.

A survey that measures and defines a property's boundaries, guaranteeing its accuracy and resolving potential boundary disputes.

Concerns or objections the buyer may have about the title's validity or completeness during the title examination.

A company that assesses the quality of a property's title, offering financial protection against any title defects.

A legal statement that confirms ownership of a property, often used as a crucial piece of evidence in a real estate transaction.

The formal date when all terms of the purchase agreement are fully executed, and all legal ownership is transferred to the buyer.

A specific date in a purchase agreement that sets a deadline for certain actions, such as the buyer's due diligence or the seller's disclosure of information.

A written estimate of the expenses associated with the sale of a property, provided to both buyer and seller before signing the sales agreement.

The part of the sales contract that specifies the date for closing (transfer of ownership) and the date the buyer takes possession of the property. These dates can be the same or different.

A clause in the sales contract that allows for an extension of the closing date if certain conditions are met, such as title issues or delays by the mortgage lender.

Money held in a separate account until the closing date, ensuring the buyer's funds are safe.

The amount of earnest money typically ranges from 1% of the purchase price to a few thousand dollars, meant to discourage the buyer from backing out and compensate the seller for lost time.

A deposit made by the buyer to cover part of the purchase price related to financing, not to be confused with earnest money.

The process of examining the property for any issues with the title, ensuring that the seller has the legal right to sell the property.

The party responsible for closing the real estate transaction and handles the transfer of funds and legal documents.

The lender who provides financing for the purchase of the property, usually overseeing the mortgage.

A financial document required by the mortgage lender, containing information about the buyer's finances and creditworthiness.

A period of time given to the buyer and seller to fulfill their obligations outlined in the contract, allowing for due diligence and completion of financial and legal aspects.

The process of carefully examining the property and its documents for any potential issues, ensuring a sound investment.

A clause in the sales contract where the buyer specifies a minimum level of title insurance coverage. It protects the buyer and lender from financial losses caused by title issues discovered after closing.

A clause in the sales contract outlining the buyer's right to terminate the contract without penalty if the seller cannot address title objections by the closing date, unless an extension is granted.

A title search is conducted by a title company to examine the history of ownership and identify any potential issues with the property's title.

In Pennsylvania, the sales contract must specify zoning classifications for properties, except for those zoned for single-family dwellings. The buyer can void the contract if this information is missing.

This clause is required in Pennsylvania sales contracts for properties that front on a state road. It's essential for developers and those accessing state right-of-ways.

The Pennsylvania Sewage Facilities Act requires specific notices in the sales contract related to the status of the sewer system at the property.

This clause provides details about the type of sewage system in use on the property.

This notice applies when there is no public sewer system, requiring an individual permit for installing, constructing, or altering a private sewage system.

This notice applies to individual sewage systems on plots of 10 acres or more subdivided after a specific date. It informs buyers that soil and site testing may not have been conducted.

This notice requires sellers to provide a cost history for maintaining sewage holding tanks. It applies to systems using temporary or permanent tanks.

This notice sets minimum distances required between water supply and sewage treatment systems, ensuring proper sanitation.

This notice applies to lots that are not allowed to have individual sewage facilities. It requires detailed planning before a new sewer system can be built.

This clause specifies the total purchase price of the property and the payment method. It may include details about the down payment, earnest money, and other payment terms.

This clause outlines the closing costs that the seller will contribute towards the transaction. These costs can be used for transaction expenses by the buyer, but may be subject to lender restrictions.

This clause includes the buyer's closing costs like property transfer tax, title search fees, and other costs.

This clause deals with the proration of expenses that cannot be terminated at closing. It also addresses any proration adjustments caused by appeals over tax bills.

The person or entity holding the earnest money deposit during a real estate transaction.

This clause specifies the timeline for the buyer to pay the earnest money deposit, usually within 5 days of signing the contract.

This section outlines procedures for handling issues with the earnest money deposit, like late or bounced checks, and assigns responsibilities to both buyer and seller.

This clause details the role of the closing attorney, who represents the mortgage lender and assists in the transaction.

This clause outlines how earnest money is paid, including method and timing, and its application toward closing costs.

This section of the contract specifies scenarios where the buyer is entitled to receive their earnest money back.

This section determines which party gets the earnest money based on the situation outlined in the contract.

The holder of earnest money can disburse the money based on their 'reasonable interpretation' of the agreement.

This section allows the holder to modify the disbursement of earnest money, providing a new notice with the reasoning.

The holder will release the earnest money to the seller if they determine the buyer has defaulted, becoming liquidated damages.

This section outlines the procedures for resolving disputes over the earnest money deposit through legal means.

A legal action where a third party (like the holder) is allowed to ask a court to decide who gets the money, especially in a dispute.

This clause protects the holder from lawsuits regarding their disbursement decisions.

This period allows the buyer to thoroughly research and investigate the property before deciding to move forward with the purchase.

The buyer has the right to terminate the contract without penalty during this agreed-upon time period for research.

A clause in the sales contract that gives the buyer the right to terminate the agreement during a specified period, known as the due diligence period, without any obligation to purchase.

A symbolic amount paid by the buyer to the seller in exchange for the option to terminate the sales contract during the due diligence period. This money is non-refundable.

This clause specifies whether the option payment will be applied towards the final purchase price at the closing of the sale.

A period during which the buyer has the right to terminate the contract, review the property, and negotiate any necessary changes.

This clause grants the buyer the right to access the property and conduct thorough inspections after giving the seller notice.

A publicly accessible database that provides information on properties suspected of being used for illegal drug production.

This clause grants the buyer the right to investigate the neighborhood to ensure it meets their needs and preferences.

A law that requires authorities to notify the community about the presence of convicted sex offenders in their vicinity.

This clause states that the seller will transfer any warranties or contracts related to the property to the buyer.

A property that is sold without any guarantees or promises for repairs. The buyer takes on the risk of any existing defects.

A Latin phrase meaning 'Let the buyer beware.' It emphasizes the buyer's responsibility to research and evaluate the property before purchasing.

This clause reminds the buyer about the due diligence period and the opportunity to raise concerns or negotiate changes.

This clause details the process for the buyer to formally terminate the sales contract during the due diligence period.

A situation where a real estate agent represents both the buyer and the seller in a transaction.

A written agreement signed by the seller specifically allowing dual agency.

The legal obligation of a real estate agent to keep confidential information about their client private, even in dual agency situations.

A situation where an agent represents only one party in a transaction but is affiliated with a brokerage that also represents the other party.

When a real estate agent is assigned to represent only the seller's interests.

The agreement between the parties regarding the payment and distribution of the real estate commission.

A clause in the contract that states buyers and sellers should rely on experts for things like inspections, appraisals, and mortgage financing, and that these are not the responsibilities of the real estate agents.

Any additional requirements stated by either the buyer or seller that are not included in the standard contract.

A clause in the contract that sets a specific date and time for the offer to expire.

A section of the Sales Contract that details repairs requested by the buyer during the due diligence period. These repairs must be completed before closing.

A clause in the Sales Contract that addresses the use of lead-based paint. Required for homes built before 1978.

A statement in the Sales Contract detailing the type of brokerage relationship involved in the transaction (e.g., selling agent, listing agent).

The broker who represents the buyer.

The broker who represents the seller.

A party who has an agency relationship with a license holder. The broker owes them the highest level of fiduciary duties.

A party involved in the transaction who does NOT have an agency relationship with the license holder. The broker owes them the lowest level of fiduciary duties.

A clause in the Sales Contract describing the relationship between the selling broker and the buyer.

A clause in the Sales Contract describing the relationship between the listing broker and the seller.

A relationship between a broker and client that could prevent the broker from acting fairly and independently. Could be familial, business, or personal.

Actions by a license holder that don't require judgment or discretion. They can assist customers but don't make decisions for them.

A clause in the Sales Contract that outlines the disclosure requirements for dual agency situations.