CNE Contract Law & Agreement Drafting 2

Question 1

When a buyer submits a counteroffer in response to a seller's listed price, the legal effect is:

Accepted Answer

The original offer is rejected and replaced by the new terms

Answer

The original offer remains open for 72 hours

Answer

The buyer must raise their offer by at least 1%

Answer

Both parties are bound by the listing price

Question 2

What is 'specific performance' as a legal remedy in contract disputes?

Accepted Answer

A court order requiring the breaching party to fulfill the contract terms

Answer

A financial penalty paid to the prevailing party

Answer

An arbitration process for resolving contract disputes

Answer

A clause requiring inspections to be completed within 10 days

Question 3

The 'statute of frauds' requires that real estate contracts must be:

Accepted Answer

In writing and signed by the parties to be charged

Answer

Witnessed by two independent parties

Answer

Filed with the county recorder within 30 days

Answer

Reviewed by a licensed attorney before execution

Question 4

What does 'escrow' refer to in the context of a real estate transaction?

Accepted Answer

A neutral third party holding funds and documents until closing conditions are met

Answer

The seller's net proceeds after commission

Answer

The buyer's right to inspect the property

Answer

The agent's fiduciary duty to the client

Question 5

What distinguishes a 'void' contract from a 'voidable' contract?

Accepted Answer

A void contract has no legal effect; a voidable contract is valid until a party elects to rescind it

Answer

A void contract can be ratified; a voidable contract cannot

Answer

A void contract requires court approval to cancel; a voidable contract does not

Answer

A void contract is only used for commercial properties; a voidable contract for residential

Question 6

In contract law, 'novation' occurs when:

Accepted Answer

An original party is replaced by a new party, releasing the original party from obligations

Answer

A party breaches the original agreement

Answer

Both parties agree to extend the closing date

Answer

A contingency is removed and the contract becomes firm

Question 7

What is a real estate 'option contract'?

Accepted Answer

An agreement giving a buyer the right, but not the obligation, to purchase a property within a specified period

Answer

A contract that allows the MLS to list multiple properties at once

Answer

A clause requiring the seller to accept the highest offer received

Answer

A financing arrangement between buyer and lender