Texas Contract Law Flashcards
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Questions and Answers

What is the right of a licensee regarding contract drafting?

The licensee has the right to draft his own contract.

The seller's disclosure notice is required unless the value of any dwelling does not exceed 5% of the value of the property. Which of the following is TRUE?

  • The notice is not required if the dwelling's value does not exceed 5%. (correct)
  • The notice is not required if the dwelling's value is over 5%.
  • The notice is required if the house is on the property but not valued.
  • The notice is required for transactions without any dwelling.

    • Which of the following is TRUE regarding the agent's actions when a buyer wants the seller to leave several items of personal property?

  • The agent cannot use any form.
  • The agent must use a Non-Realty Items Addendum.
  • The agent is required to use TREC forms.
  • The agent may use the form. (correct)

    • What type of committee is the Broker-Lawyer Committee?

    <p>Advisory</p> Signup and view all the answers

    The rules of the Texas Real Estate Commission do not have the full force and effect of law.

    <p>False</p> Signup and view all the answers

    How many commissioners are on the Texas Real Estate Commission?

    <p>9</p> Signup and view all the answers

    Which of the following is NOT required to provide a written seller's disclosure notice?

    <p>A beneficiary under a deed of trust who acquired the real property at a sale.</p> Signup and view all the answers

    Which of the following terms defines a transfer in writing of interest in a bond, mortgage, or lease?

    <p>Assignment</p> Signup and view all the answers

    What distinguishes a bilateral contract from a unilateral contract?

    <p>Both parties promise to act.</p> Signup and view all the answers

    What is consideration in a contract?

    <p>Something of value that induces a person to enter into a contract.</p> Signup and view all the answers

    A contract that is missing essential elements is considered valid.

    <p>False</p> Signup and view all the answers

    The phrase 'time is of the essence' in a contract requires what?

    <p>Performance within a stated period of time.</p> Signup and view all the answers

    What is a contingency in a contract?

    <p>A provision that requires a certain act or event to occur before the contract is binding.</p> Signup and view all the answers

    What is an executed contract?

    <p>A contract that has all provisions performed.</p> Signup and view all the answers

    A sales contract that exchanges promises between parties is said to be what type?

    <p>Bilateral</p> Signup and view all the answers

    Once a sales contract is completed with all parties fulfilling their promises, the contract is categorized as ____.

    <p>An executed contract</p> Signup and view all the answers

    When a contract lacks one of the essential elements of a legal contract it is _____?

    <p>Void</p> Signup and view all the answers

    The process whereby the government acquires privately owned property for public use is called ____?

    <p>Eminent domain</p> Signup and view all the answers

    Which of the following is a type of life estate?

    <p>Homestead</p> Signup and view all the answers

    The substitution of a new contract for an existing contract is called _____

    <p>novation</p> Signup and view all the answers

    A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor is a _____

    <p>lien</p> Signup and view all the answers

    Which of the following are mandatory TREC forms? (Select all that apply)

    <p>Loan Assumption Addendum</p> Signup and view all the answers

    Seller is required to provide a disclosure of a property condition to the buyer for which of the following?

    <p>Licensee's 10 year old single-family home</p> Signup and view all the answers

    Seller is NOT required to provide a disclosure of a property condition to the buyer for which of the following?

    <p>From one co-owner to another</p> Signup and view all the answers

    Under DTPA, what must a plaintiff prove to get triple damages?

    <p>That the defendant knew the misleading statement was false.</p> Signup and view all the answers

    The seller's disclosure notice must be completed to the best of the seller's belief and knowledge.

    <p>True</p> Signup and view all the answers

    The Texas Real Estate Commission does not have rule-making authority.

    <p>False</p> Signup and view all the answers

    Which of the following is a TREC-promulgated contract?

    <p>Residential Condominium Contract</p> Signup and view all the answers

    Which committee is responsible for drafting and revising contract forms?

    <p>Broker-Lawyer Committee</p> Signup and view all the answers

    The form may be reproduced on any size paper at least as large as the size used by TREC.

    <p>False</p> Signup and view all the answers

    Who appoints the TREC commissioners?

    <p>Governor</p> Signup and view all the answers

    What does the Broker-Lawyer Committee do?

    <p>Drafts contracts</p> Signup and view all the answers

    A seller's disclosure notice is required in the sale of real property pursuant to a court order.

    <p>False</p> Signup and view all the answers

    How many promulgated contracts does TREC issue?

    <p>Six</p> Signup and view all the answers

    Under what circumstances can a licensee complete a contract for the sale of real property without practicing law?

    <p>Using a TREC-adopted form</p> Signup and view all the answers

    When a man dies, his property automatically transfers to his heirs with a seller's disclosure notice requirement.

    <p>False</p> Signup and view all the answers

    When is the owner required to provide a disclosure regarding a death?

    <p>If a previous occupant died falling down a broken staircase</p> Signup and view all the answers

    How many days does a buyer have to terminate a contract after receiving TREC OP-H?

    <p>7</p> Signup and view all the answers

    According to the Texas Real Estate License Act, which of the following requires that a licensee be a practicing attorney?

    <p>Advising a person regarding the validity of title to real property</p> Signup and view all the answers

    What does Section 5.008 of the Texas Property Code say about properties with low dwelling value?

    <p>It does not require the seller to provide a written notice of the property's condition.</p> Signup and view all the answers

    A seller of residential property in Texas must give what notice to the buyer?

    <p>Written notice of the property's condition</p> Signup and view all the answers

    Why would a seller want to fill out a seller's disclosure notice?

    <p>All of these</p> Signup and view all the answers

    If an agent is preparing an offer for a buyer but has not received a completed seller's disclosure, what can the buyer do?

    <p>Make an offer and ask the seller to provide the notice within a certain number of days.</p> Signup and view all the answers

    What law requires owners to provide a written seller's disclosure notice?

    <p>Texas Property Code</p> Signup and view all the answers

    Who appoints the lawyers to the Broker-Lawyer Committee?

    <p>President of the state bar</p> Signup and view all the answers

    What is the primary difference between a lawsuit under the Deceptive Trade Practices Act (DTPA) and other civil actions?

    <p>Treble damages are available under the DTPA.</p> Signup and view all the answers

    What is the possible result for an owner not providing a seller's disclosure notice when required?

    <p>The seller could be terminated for failing to disclose, and the buyer could terminate the contract.</p> Signup and view all the answers

    Which of the following is an exception to using a TREC-promulgated contract form?

    <p>All of these</p> Signup and view all the answers

    Which of the following concerns led to TREC prohibiting licensees from practicing law?

    <p>Giving legal counsel regarding instrument validity</p> Signup and view all the answers

    If a seller did not provide a seller's disclosure notice when required, what can the buyer do?

    <p>Terminate the contract</p> Signup and view all the answers

    If no standard form has been promulgated by TREC, what can a real estate agent do?

    <p>Use a form authorized by an attorney</p> Signup and view all the answers

    What is the make-up of the Broker-Lawyer Committee?

    <p>Six brokers, six lawyers, and one member of the general public</p> Signup and view all the answers

    When should a buyer review the written seller's disclosure notice?

    <p>Prior to writing an offer</p> Signup and view all the answers

    The seller's spouse had an HIV infection and the seller must disclose this illness.

    <p>False</p> Signup and view all the answers

    How are real estate brokers who are members of the Broker-Lawyer Committee appointed?

    <p>Appointed by the Texas Real Estate Commission</p> Signup and view all the answers

    What is Texas Real Estate Commission (TREC) Form OP-H?

    <p>An approved form for voluntary use.</p> Signup and view all the answers

    Which groups provide forms that can be used by sellers to make the required property disclosure?

    <p>All of these</p> Signup and view all the answers

    A real estate broker acting only as a principal is exempt from which requirement?

    <p>Mandatory use of a TREC-promulgated form</p> Signup and view all the answers

    What is required for a contract for deed?

    <p>This type of contract must be drafted by an attorney.</p> Signup and view all the answers

    How many members are on the Broker-Lawyer Committee?

    <p>13</p> Signup and view all the answers

    What effect do the rules made by the commission have on licensees?

    <p>Have full force and effect of law</p> Signup and view all the answers

    In a Deceptive Trade Practices Act (DTPA) action, what may be awarded to a plaintiff?

    <p>All of these</p> Signup and view all the answers

    What advice can an agent give to an unrepresented buyer?

    <p>Advice on having the abstract examined by an attorney</p> Signup and view all the answers

    Which of the following is an exception to the TREC rules on contract use?

    <p>When the buyer requires another form</p> Signup and view all the answers

    What is a TREC-promulgated form?

    <p>Addendum for Sale of Other Property by Buyer</p> Signup and view all the answers

    What is one of the purposes of the Texas Real Estate License Act?

    <p>All of these</p> Signup and view all the answers

    What does Section 5.008 of the Texas Property Code say about one co-owner selling to another?

    <p>It does not require the selling co-owner to provide a written notice of the property's condition.</p> Signup and view all the answers

    Which of the following is an exception to using TREC-promulgated contract forms?

    <p>When the licensee is acting as a principal and not as an agent</p> Signup and view all the answers

    Which form is approved by TREC for a written seller's disclosure notice?

    <p>OP-H</p> Signup and view all the answers

    In the event a licensee is purchasing property for himself, is a TREC-promulgated contract appropriate?

    <p>Yes</p> Signup and view all the answers

    Study Notes

    Mandatory TREC Forms

    • One to Four Family Residential Contract, Farm and Ranch Contract, Loan Assumption Addendum are required forms.

    Seller Disclosure Requirements

    • Disclosure of property conditions is mandatory for homes over ten years old and homes valued at $50,000 on land worth $500,000.
    • No disclosure is needed for sales by court order, new residences, government agency transactions, or co-owner transfers.
    • To obtain triple damages under the Deceptive Trade Practices Act (DTPA), plaintiffs must prove the misleading statement was known to be false.
    • Sellers must complete the seller's disclosure notice to the best of their belief as per Texas Property Code Section 5.008.

    TREC Rule-Making Authority

    • The Texas Real Estate Commission (TREC) possesses rule-making power that carries the full force of law.

    TREC-Promulgated Contracts

    • There are six TREC-promulgated contracts, including the Residential Condominium Contract and others related to property transactions.

    Broker-Lawyer Committee Role

    • Responsible for drafting and revising real estate contract forms to enable smoother transactions and minimize disputes.

    Use of Forms

    • Reproduced TREC forms must match the original size, and agents can rely on forms prepared by lawyers or the Broker-Lawyer Committee in the absence of a TREC form.

    Seller Disclosure Notice

    • Not required for transactions via a court order or fiduciaries managing estates.
    • Buyers have seven days post-contract signing to terminate if they receive the Seller's Disclosure of Property Condition late.

    Licensee Regulations

    • Only licensed attorneys can advise on the validity of title to real property.
    • Failure to provide the seller's disclosure may lead to contract termination at the buyer's discretion.

    Exemptions and Penalties

    • Transactions in which the seller's dwelling value is below 5% of total property value are exempt from disclosure requirements.
    • Certain transactions involving government forms don’t necessitate TREC forms.

    Committee Composition and Functions

    • The Broker-Lawyer Committee consists of six brokers, six lawyers, and one public member, all serving staggered six-year terms.

    Buyers' Responsibilities

    • Buyers should review the seller's disclosure notice before making an offer to understand property conditions accurately.

    Non-Disclosure and Health

    • Sellers are not obligated to disclose the health status of previous occupants, such as HIV or AIDS.

    Licensee Actions

    • A licensee can draft their own contracts if acting as a principal, and can also use forms like a Bill of Sale for personal property transactions.

    Agency vs. Principal

    • Licensees acting solely as principals in transactions are exempt from using TREC forms, while agents must adhere to regulations.

    Commission Leadership

    • TREC commissioners are appointed by the governor with senate approval, serving staggered six-year terms.

    General Compliance

    • All licensed real estate transactions in Texas must comply with the Texas Property Code regarding seller disclosures and contract usage.### Real Estate Terms and Concepts

    • A beneficiary under a deed of trust becomes the owner of real property upon sale conducted through a power of sale.

    • The Texas Real Estate Commission (TREC) consists of 9 commissioners.

    • Assignment refers to the written transfer of interest in a bond, mortgage, or lease.

    • In a bilateral contract, both parties have legal obligations (e.g., lease, purchase agreement), while a unilateral contract binds only one party (e.g., option, promissory note).

    • Breach of contract is defined as failing to perform a contract’s conditions, like not paying rent or mortgage.

    • Consideration is something of value exchanged in a contract, such as property rights for money.

    • An express contract is explicitly stated in words (oral or written), whereas an implied contract arises from the involved parties' actions.

    • An installment contract allows a buyer to occupy property while making payments, but the seller retains legal title until the final payment is made.

    • Liquidated damages are pre-determined amounts specified in the contract as compensation to an injured party upon breach.

    • An option is a unilateral agreement allowing one party to decide on a property transaction within a specified timeframe.

    • The Statute of Frauds mandates that certain contracts, including deeds and real estate sales, must be in writing to be enforceable.

    • The phrase time is of the essence mandates completing actions within specific periods in contracts.

    • An unenforceable contract meets valid contract criteria but cannot be legally enforced (e.g., unsigned contracts).

    • A void contract lacks legal force due to missing essential elements, whereas a voidable contract allows one or both parties to reject it.

    • A contingency is a contract provision requiring a specific act or event to occur before binding the parties.

    • A contract is a legally enforceable set of promises that can be either unilateral or bilateral in nature.

    • A counteroffer is an alternate offer responding to an original offer, which nullifies the initial offer unless revisited by the original offeror.

    • Earnest money is a buyer's deposit showing intention to complete a sale, forfeited upon default but credited upon closing.

    • Equitable title refers to a buyer's interest in property through a contract for deed or installment contract, even if legal title is held by the seller.

    • An escrow contract outlines responsibilities among the buyer, seller, and escrow holder when earnest money is deposited.

    • An executed contract is one where all parties have fulfilled their contractual promises.

    • An executory contract involves provisions that are yet to be fully performed.

    • A land contract allows the seller to maintain legal ownership until full payment is made by the buyer.

    • Novation is the process of replacing a party or obligation in a contract, requiring consent from all original parties.

    • Offer and acceptance are crucial components that create a valid contract, often referred to as a meeting of the minds.

    • Reality of consent ensures that all parties enter a contract voluntarily and freely.

    • Rescission allows a party to cancel a contract, reverting both parties to their conditions before the agreement.

    • Suit for specific performance involves a buyer requesting the court compel the seller to complete the sale as agreed.

    • A valid contract conforms to all legal requirements, making it binding and enforceable.

    • When a contract exchanges a promise for a promise, it is categorized as bilateral.

    • After all obligations of a sales contract are met and the transaction is completed, it is termed an executed contract.

    • A casual agreement about purchasing real estate that lacks documentation is not considered a contract.

    • A contract missing one of its essential elements is deemed void.

    • Novation involves the replacement of a contract with a new one.

    • The government has the right to take real estate for public use, termed as eminent domain.

    • The process of the government acquiring private property for public use is known as condemnation.

    • A fee simple estate grants perpetual ownership rights to the property without claims from others.

    • A homestead qualifies as a legal life estate, offering protection to the owner.

    • A lien is a legal right allowing creditors to secure debts against a debtor's property.

    • A sales contract typically does not include a history of previous owners as a detail.

    • A sales contract may include lists of personal property to be included with the real estate.

    • A complete agreement in a real estate sales contract exists between the buyer and seller.

    • After signing a contract, the buyer possesses an equitable title to the property.

    • If a sales contract stipulates that an attorney's approval is necessary, it is referred to as a contingency.

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    Test your knowledge of mandatory TREC forms and property disclosure requirements in Texas contract law. This quiz covers key concepts essential for understanding real estate transactions in Texas. Perfect for students and professionals looking to sharpen their legal knowledge.

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