Arizona Real Estate License Contracts and Contract Law 3 — Questions and Answers
Question 1: The legal principle that prevents parties from introducing prior oral agreements to contradict a written contract is the:
- Statute of Frauds
- Parol Evidence Rule (Correct answer)
- Doctrine of Estoppel
- Rule of Rescission
Correct answer: Parol Evidence Rule
The Parol Evidence Rule bars prior oral statements from contradicting the terms of a fully integrated written contract.
Question 2: What happens to earnest money when a buyer defaults on a valid purchase contract without a valid contingency?
- It is refunded to the buyer
- It is typically forfeited to the seller (Correct answer)
- It is split evenly by law
- It is retained by the broker
Correct answer: It is typically forfeited to the seller
A defaulting buyer who has no valid contingency generally forfeits the earnest money to the seller as agreed damages.
Question 3: The substitution of a new contract or new party for an existing one, releasing the original obligation, is called:
- Assignment
- Novation (Correct answer)
- Rescission
- Ratification
Correct answer: Novation
Novation substitutes a new contract or party and releases the original party from liability.
Question 4: A contract that has been fully performed by all parties is described as:
- Executory
- Executed (Correct answer)
- Voidable
- Implied
Correct answer: Executed
An executed contract is one in which all parties have completely fulfilled their obligations.
Question 5: Under Arizona contract law, time is considered 'of the essence' when:
- It is never enforceable
- The contract expressly states deadlines are mandatory (Correct answer)
- Only the buyer requests it
- The property is over $500,000
Correct answer: The contract expressly states deadlines are mandatory
A 'time is of the essence' clause makes stated deadlines strictly enforceable, and failure to meet them is a breach.
Question 6: Which remedy allows a court to order a seller to actually convey the property as promised?
- Liquidated damages
- Specific performance (Correct answer)
- Rescission
- Compensatory damages
Correct answer: Specific performance
Specific performance compels a party to complete the contract because real estate is considered unique.
Question 7: A contract signed under threat or coercion is:
- Valid
- Voidable by the coerced party (Correct answer)
- Void from the start for both
- Automatically enforceable
Correct answer: Voidable by the coerced party
Duress makes a contract voidable at the option of the party who was coerced.
Arizona Real Estate License Contracts and Contract Law 3
The legal principle that prevents parties from introducing prior oral agreements to contradict a written contract is the: