OREA Contract Law for Real Estate 4

Question 1

In Ontario, what is an 'option to purchase' in real estate?

Accepted Answer

A contract that gives the holder the right, but not the obligation, to purchase a property at a specified price within a specified time

Answer

An option to purchase is a contract where the property owner grants another party the right to buy the property at an agreed price within a specified time. The option holder pays consideration for this right but is not obligated to exercise it.

Question 2

What is 'assignment' of a real estate contract in Ontario?

Accepted Answer

The transfer of one party's rights and obligations under a contract to a third party

Answer

Assignment occurs when a party to a contract transfers their rights (and sometimes obligations) to a third party. In real estate, a buyer might assign their Agreement of Purchase and Sale to another buyer before closing, subject to any restrictions in the contract.

Question 3

In Ontario real estate, what is the significance of 'time is of the essence'?

Accepted Answer

It means that the time limits specified in the contract are strictly enforceable and failure to meet them constitutes a breach

Answer

When a contract states 'time is of the essence,' the specified dates and deadlines are essential terms. Failure to perform by the specified time constitutes a breach of contract, potentially entitling the other party to terminate the agreement and seek remedies.

Question 4

What is an 'entire agreement clause' in an Ontario real estate contract?

Accepted Answer

A clause stating that the written contract contains the complete agreement between the parties, superseding all prior negotiations and agreements

Answer

An entire agreement clause declares that the written contract constitutes the whole agreement between the parties. It supersedes all prior oral or written negotiations, representations, and agreements, reinforcing the parol evidence rule.

Question 5

In Ontario, what is 'frustration' of a real estate contract?

Accepted Answer

When an unforeseen event beyond the parties' control makes performance of the contract impossible or fundamentally different from what was agreed

Answer

Frustration occurs when an unforeseen event (such as the destruction of the property by fire before closing) makes performance impossible or radically different from what was contemplated. The contract is discharged and both parties are released from their obligations.

Ontario Real Estate Practice Test

Ontario Real Estate Practice Test

OREA Contract Law for Real Estate 4