Questions and Answers
A state law that requires all real estate contracts to be in writing to be enforceable by the courts is the:
Seller Bruce signs the offer from prospective buyer Lori and hands it back to his broker. What element is missing to make this a valid contract?
Each of these is required to form a valid and enforceable contract except:
Gary and Tom have a contract. Gary gives consideration that is comparable in value to Tom's consideration. This is considered:
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Mike and Steve enter into a contract in which Steve will buy Mike's house for $100,000. Before closing, Mike learns that Steve is 17 years old. How can this contract be terminated without closing the sale?
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John and Mary are getting a divorce. John tells Mary that unless she agrees to sell their home immediately and split the proceeds, he will institute proceedings to gain custody of the children. If she agrees, the sales contract may then be voidable because of:
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Busy real estate salesperson Ted engages Rose as an unlicensed assistant to handle his phone calls and generally keep him on schedule. He pays Rose a monthly salary. Ted's designated broker Lucy is not responsible for supervising Rose's activities.
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Kyle is a licensed real estate broker who owns a small brokerage as a self-employed broker. He has one licensed salesperson working for him, Susan. Gloria, an unlicensed staff member, handles the day-to-day administrative tasks in the office. Kyle is required to develop a policy and procedures manual.
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Bluebird Realty's designated broker Joel can require licensees to submit all sales contracts to him for review by the end of the next business day after they are signed.
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Jet Realty, Inc. is a real estate corporation with 75 licensees and 30 other employees. Who bears the responsibility for developing and maintaining the brokerage policy and procedures manual?
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According to the Arizona Administrative Code, an employing and designated broker shall exercise reasonable __________ over the activities of brokers, salespersons, and others in the employ of the broker.
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How many business days does a supervising broker have to review and initial a contract once it is signed?
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A designated broker is responsible for initialing, signing, and dating all the following documents within the statutory timeframe except:
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How long is the designated broker required to keep a contract after it has been finalized and completed?
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The first critical date in the transaction is the mutual acceptance of the purchase contract.
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According to the AAR Critical Date List, the action that is due upon the acceptance of the purchase contract is the delivery of the earnest money from the buyer to the escrow company.
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Study Notes
Contract Law Fundamentals
- Statute of Frauds: A state law mandating all real estate contracts be in writing for court enforceability.
- Communication back to the Offeror: Essential for validating a contract; if the seller signs and returns an offer, confirmation must reach the offeror.
- Earnest Money: While important, it is not a mandatory requirement for forming a valid enforceable contract compared to consideration, legal purpose, and mutual assent.
Considerations in Contracts
- Adequate Consideration: Occurs when both parties provide comparable value; ensures fairness in the agreement.
- Voidable Contracts: A contract can be terminated without closing based on factors like age or legal capacity, highlighting the rights of parties, especially minors.
Duress and Contract Validity
- Duress: If a party is coerced into an agreement through threats, as in the case of John and Mary’s divorce, the contract may be deemed voidable.
Responsibilities and Regulations
- Broker Responsibility: Designated brokers have oversight duties and must review contracts, with set timeframes for initialing and signing documents.
- Policy and Procedures Manual: The development rests with the employing broker and designated brokers, ensuring compliance and operational standards.
Timeframes and Legal Requirements
- Review Period: A supervising broker has 10 business days to review and initial a signed contract.
- Document Retention: Designated brokers are required to maintain finalized contracts for 5 years, crucial for regulatory compliance.
- Critical Dates: Mutual acceptance of the purchase contract marks the first critical date in transactions.
True/False Statements
- Supervisory Accountability: Brokers must supervise the activities of their staff effectively.
- Document Signing Requirements: Designated brokers must initial various legal documents within statutory timelines, excluding certain requests like advertising.
These notes outline the essentials of contract law relevant to real estate, emphasizing the need for written documentation, fairness in exchanges, and the responsibilities of brokers in legal situations.
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Description
Test your knowledge on crucial concepts of contract law, including the Statute of Frauds, communication back to the offeror, and the implications of duress. This quiz covers the essential elements that make contracts valid and enforceable, providing a comprehensive overview of key principles.
