Champions School of Real estate (TX) -
Law of Contracts Questions and
Complete Solutions Graded A+
1. Default - Answer: When a party to a contract fails to perform under the contract, that party is in ____
1. Breach of contract - Answer: Failure to perform is also commonly referred to as a _____
1. Casualty loss - Answer: The contract will address possible _______ should the property be damaged
or destroyed by flood, fire, or another disaster. The seller typically bears responsibility for this before
closing
2. Right of refusal - Answer: A tenant has the right to match or better any offer the landlord may receive
on the property before the property can be sold to someone else.
3. Buyer Default - Liquidated damages - Answer: The seller can choose to accept the buyer's earnest
money as liquidated damages, releasing all parties from any further obligation under the contract.
Liquidated damages are damages that are established in the contract.
3. Buyer Default - Monetary damages - Answer: In addition to specific performance, the injured party
may "seek such other relief as may be provided by law." This would be an award of monetary damages
by the court. Because monetary damages are awarded by the court, one never knows what they will be
until the court rules.
3. Buyer Default - Specific performance - Answer: The injured party files a court action seeking an order
of the court directing the defaulting party to perform according to the terms of the contract. Specific
performance is the only remedy that would possibly result in the full execution (closing) of the
transaction.
3. Seller Default - Answer: In the event of default by the seller, the buyer becomes the injured party
4. Paragraph 11.A. Commission: - Answer: Explains the buyer broker's fees, if any.
,4. Paragraph 11.B. Source of Commission Payment: - Answer: The broker anticipates payment of the
commission by the seller. If the seller does not pay the commission or if the commission is less than
what is entered in 11.A, the buyer is obligated to pay the difference.
4. Paragraph 11.E. Acquisition of Broker's Listing: - Answer: If the buyer purchases one of the broker's
listings, the seller will pay the entire fee, and the buyer will have no liability for the payment of a
commission.
4. Paragraph 11.G. Protection Period: - Answer: The protection period is a period of time during which
the agreement expires that the buyer may owe the broker a fee if a property is purchased.
5. TEXAS VETERAN'S LOAN PROGRAM - Answer: s a benefit that every buyer with a military background
should consider. To participate in the program, the Veteran obtains an FHA, VA, or conventional loan
from a participating lender. The qualification process is the same as for any other FHA, VA, or
conventional loan. The difference is that the loan is sold to the Texas Veterans Land Board (VLB), as
opposed to a secondary market purchaser such as Fannie Mae or Freddie Mac.
6. PHYSICAL CHARACTERISTICS OF LAND: 1. Indestructibility or durability - Answer: refers to the fact that
land cannot be destroyed. It remains, no matter what happens to it. It may go underwater, become a
crater, or be added to. In any case, the land will still be there; it is permanent.
6. PHYSICAL CHARACTERISTICS OF LAND: 2. Immobility - Answer: refers to the fact that land cannot be
moved. When personal property is purchased, the buyer can move it to a new location. When land or
rights in land are purchased, the owner must go to the land.
6. PHYSICAL CHARACTERISTICS OF LAND: 3. Nonhomogeneity - Answer: refers to the fact that no two
parcels of land are the same. Even two identical-looking lots in a subdivision at least differ in their
position on the earth. Each parcel of land is unique.
6. ECONOMIC CHARACTERISTICS OF LAND: 1. Scarcity - Answer: comes from the theory of supply and
demand. When there is a shortage of something that individuals want, the price goes up.
6. ECONOMIC CHARACTERISTICS OF LAND: 2. Modification - Answer: refers to the fact that value is
affected by man-made changes to the land. These changes can be on the land itself or off-site. Examples
, of modification include improved transportation, which makes land more accessible, such as the
railroads crossing the United States or airports
6. ECONOMIC CHARACTERISTICS OF LAND: 3. Fixity - Answer: refers to the fact that land, and additions
to the land, such as buildings, take long periods to pay for themselves
6. ECONOMIC CHARACTERISTICS OF LAND: 4. Situs - Answer: refers to the location of the property or
land from an economic, not a geographic viewpoint
7. PRESENTATION OF OFFERS - Answer: A license holder has a duty to communicate or submit offers to
his or her client. The communication or submission of an offer should be done promptly because the
license holder's duty is to keep the principal or client informed at all times of material information.
8. title insurance policy - Answer: a contract between the title company and the insured. The title
insurance company agrees to compensate or reimburse the insured against losses sustained as a result
of defects in title, other than those exceptions listed in the policy.
8. abstract of title - Answer: a complete history of the title of a piece of property that includes deeds,
easements, liens, foreclosures, wills, marriages, deaths, life estates, fee simple estates, and anything
else that may have ever been recorded about a property. This abstract was then given to an attorney
8. attorney's opinion of title - Answer: an opinion regarding the state of the title and its ability to be
transferred
8. title commitment - Answer: divided into sections called "schedules," and must be delivered by the
title company within 20 days of its receipt of the contract.
9. TREC has only two promulgated lease forms: - Answer: 1. Buyer's Temporary Residential Lease - for
use when the buyer occupies the property for no more than 90 days prior to closing.
2. Seller's Temporary Residential Lease - for use when the seller occupies the property for no more than
90 days after closing. When leasing residential properties, license holders who are REALTORS® generally
use forms available from the Texas REALTORS.® Those who are not REALTORS® must use forms from
other sources
