BC Real Estate Trading Services Course Law of Contracts Questions and Answers

Question 1

In British Columbia, which of the following is an essential element required for the formation of a legally binding contract for the purchase and sale of real estate?

Accepted Answer

A written agreement signed by the party against whom enforcement is sought.

Answer

A verbal agreement between a buyer and seller witnessed by a third party.

Answer

An advertisement listing the property for sale with a specific price.

Answer

A handshake agreement followed by the payment of a deposit.

Question 2

A buyer in Vancouver includes a 'subject to financing' clause in their Contract of Purchase and Sale. If the buyer acts in good faith but is unable to secure a mortgage approval from their bank after making reasonable efforts, what is the most likely outcome?

Accepted Answer

The contract becomes null and void, and the buyer is typically entitled to the return of their deposit.

Answer

The buyer is in breach of contract and will forfeit their deposit.

Answer

The seller can sue the buyer for specific performance to force the completion of the sale.

Answer

The buyer is obligated to find an alternative lender, regardless of the interest rate offered.

Question 3

In a rising real estate market in BC, a seller accepts an offer but later refuses to complete the transaction, hoping to sell to another party for a higher price. Which of the following remedies is a buyer most likely to seek from the court?

Accepted Answer

Specific performance

Answer

Quantum meruit

Answer

Rescission

Answer

An injunction

Question 4

What is the key difference between an 'assignment' and a 'novation' of a Contract of Purchase and Sale in Canada?

Accepted Answer

A novation replaces the original contract with a new one, releasing the original party from their obligations, whereas an assignment transfers rights but may not release the original party from their obligations.

Answer

An assignment transfers only the obligations, while a novation transfers only the rights.

Answer

An assignment requires the consent of all original parties, whereas a novation only requires notice to be given.

Answer

A novation is used for commercial properties, while an assignment is used for residential properties.

Question 5

A Contract of Purchase and Sale in British Columbia contains a clause stating 'Time is of the essence'. What is the legal significance of this clause?

Accepted Answer

It makes all dates and deadlines in the contract strictly enforceable, and a failure to perform on time is a breach of contract.

Answer

It is a standard, non-binding phrase suggesting the parties should act promptly.

Answer

It allows for a reasonable grace period (e.g., 24-48 hours) for any missed deadlines.

Answer

It is primarily used to determine the date for property tax adjustments.

Question 6

Which of the following scenarios best describes a breach of contract where the seller would be entitled to keep the buyer's deposit in a BC real estate transaction?

Accepted Answer

The buyer removes all subject clauses, making the contract firm and binding, but then refuses to complete the purchase on the agreed-upon completion date.

Answer

The buyer discovers a minor, previously undisclosed issue during the home inspection and decides not to proceed, while the contract was subject to a satisfactory inspection.

Answer

The buyer's financing is not approved, and the contract contained a subject-to-financing clause which the buyer could not satisfy despite good faith efforts.

Answer

The property is significantly damaged by a fire after the contract is signed but before the completion date, and the contract is silent on the matter of risk.