MACINTOSH REAL ESTATE SCHOOL - SAMPLE Q & A
(NOTE: This is just a sample of the MacIntosh Online Q&As - an extensive online resources available only to MacIntosh students,
to aid in their studies of the concepts required by the Real Estate Commission, and needed to pass the state license exam.
The chapters, exercises, and quizzes in the MacIntosh course materials and program, are naturally much more extensive.)
CHAPTER 1 - CONTRACTS - SAMPLE Q&A
General Summary of Offer and Acceptance / time-limits for Acceptance
Before talking about offer/acceptance, we need to clear up any confusion about offeror/offeree. We'll break it down this way: The offeror makes the offer; then the offeree can either accept the offer or refuse to accept. The way the offeree (the one to whom the offer is being made) tells the offeror that that the offer is accepted is by notifying the offeror. Put another way, the offer isn't accepted if the offeree simply thinks to himself "I accept" and doesn't tell the person making the offer.
There are many ways that the offeree can tell (notify) the offeror that there has been acceptance: Telling him/her in person; telephoning the offeror; emailing; etc. OR... the offeree may accept by mail!
The issue here is that if you put an acceptance in the mail, the offeror won't know that it has been accepted until a few days later when he/she gets the mail. So, the courts had to decide (in a landmark case called "Adams vs. Lindsell", in case you care) if an offer is officially accepted when the offeree mails the acceptance, or when the offeror receives the acceptance in the mail. They decided that, for the sake of consistency (since "Acceptance does not take place until the offeror is notified") that the act of placing the acceptance in the mail was sufficient for official "Acceptance".
Of course, all that really gets tangled up if, say: 1) Offeror makes the offer; 2) Offeree accepts by mail; 3) while the acceptance is in the mail, Offeror (who thinks that since he hasn't heard from offeree) makes the offer to someone else; 4) the second offeree accepts in person; 5) THEN the first offeree's acceptance arrives in the mail! So, who does offeror have a contract with...? The first offeree who accepted by MAIL! Since Acceptance takes place when the offeree puts the acceptance in the mail, their acceptance was valid = forming a contract (assuming there is present the other requirement of Consideration), meaning that the offeror's second offer was invalid and therefore couldn't have been accepted by the second offeree anyway.
That is why all offers should be made with two essential elements: 1) a set time-limit for acceptance; and 2) a specific method of communicating the acceptance. For example, if offeror says: "Acceptance must be made in person by March 11, 2003 by Noon." If offeree (in this case) accepts by MAIL, then it is not a valid acceptance. Likewise, if offeree accepts on March 12, it is not valid.
But these are important and fundamental issues (offeror/offeree and offer/acceptance) and you definitely will get questions on this on our quizzes and final exams and on the state license exam.
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If a property is offered/listed at $X and we put in a full-price offer without contingency - is the seller required to accept it???
Remember that the SELLER is the one making the initial OFFER. The LISTING is the OFFER.
So, if you are the BUYER and you ACCEPT the seller's OFFER... (but this is important) WITHOUT CHANGING ANYTHING. Then you have the first elements required for a contract - offer and acceptance. Presuming you have the required consideration (i.e., the exact Earnest Money Deposit stated in the Listing) then you would have a CONTRACT BINDING ON BOTH SELLER AND BUYER.
MUST the seller "accept"...? Well, "accept" is not the correct term, because YOU the buyer already "accepted" and formed a contract. The correct term would be "adhere to the terms of the contract". The answer to THAT is YES... If they fail to do so, then they would be in BREACH.
What does that MEAN, however? Well, this is not a *crime* we're talking about, and there are no "Contract Police" - so the buyer would be forced to go to court, prove that they were damaged, etc. So, it's a big legal hassle if you want to force a contract that was in its beginning stages.
ALSO, going back to the "ACCEPTANCE" by BUYER: IF you CHANGE ANY TERM of the seller's listing (for example, the Listing said "$5,000 deposit" and buyer only gave a $2,500 deposit) THEN that WAS NOT ACCEPTANCE. THEN buyer has made a NEW OFFER.
THEN the answer to your question is DIFFERENT. MUST seller "accept" this new offer? Absolutely not.
What if buyer goes back and "renews" seller's original offer (in my example, it would be all the original terms AND the $5,000 seller first asked for the deposit.) Does this mean that the old offer of seller's (the listing) is now binding on the seller? NO WAY. When buyer made the new "offer" (by changing the terms of seller's listing - even slightly) it WIPED OUT seller's original offer, making it - technically - no longer binding on seller.
Remember - this is all "theoretical", textbook examples of the basic contracts principles. It certainly could not be anything like "legal advice" that you could rely on, assuming you have a "real life" case you are asking about.
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What is “Time is of the Essence”?
Make sure that you always keep in mind that there are two "fields" of study here: "Uniform" and "Colorado" - and the information in those areas are what you will be tested on the "Uniform" and "Colorado" portions of the state exam. Many of the chapters in the blue (Uniform) book start by presenting the General ("Uniform") version of the law or rule - which is fundamental ("common") law that is the same most everywhere in the United States. That will be the version that is tested on the Uniform portion (80 questions) of the state license exam. Then - later in that same chapter - we often present the "Colorado" version of that law, which modifies and changes the Uniform ("common") law. On the Colorado portion of the state license exam (70 questions) you will be tested only on that revised, Colorado, version of the law.
Here, you might be mixing up the two versions (Uniform and Colorado) because you are referring to the "Time is of the Essence" provision in the Colorado-specific Contract to Buy and Sell Real Estate in the same breath as the basic (Uniform, General or "common") law requirements of offer and acceptance. We just want to make sure that you are always aware that with every topic in the Uniform (blue) book, there are two versions of things, and you will be tested on totally different aspects of those things when it comes time to take not only our finals and prep exams, but most importantly - the (two parts of the) state license exam.
Anyway, in answer to your question: "Time is of the Essence" is a common provision in any contract (not just the Colorado Sales Contract) which means that if the contract doesn't state a definite time that it must be completely performed by, then it should be "done" within a "reasonable" time, given the circumstances. In other words, if I promise to give you $500 for your comic book collection and you say "OK"... then we both forget about the whole deal without having done anything... then 5 years from now, you can't come back on me and sue me for "breach". (A month later - maybe, but 5 years was not "reasonable" in this case.)
Therefore, if there is a time frame stated in your contract (6 months - in your example), then Time is of the Essence doesn't come into play here.
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Quiz Question #2 - What is “reality of consent”?
“Reality of consent” is just another way of saying “the consent is real” (or "not imagined"). So answer "b" is not correct, because the consent (to contract) is necessary, even though it may be implied (by the conduct of the parties.)
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Quiz Question #2 – I thought you needed competent parties (answer “c”) for a contract?
Competent parties is certainly necessary for a valid contract, (it is part of the final necessary element, “absence of defenses”.)
But that is not what the question asked. It asks what is required for "Mutual Assent" (which is one of the other requirements for a valid contract,
but has some specific requirements of its own.)
You are equating “mutual assent” with “a valid contract”. Not so. “Mutual Assent” simply means offer + acceptance.
Offer and acceptance are merely two of the requirements of a valid contract, and the remaining two are consideration and absence of defenses.
So, this question is not asking what is necessary for a contract, but just the first two parts. Therefore, “mutual consent” consists of offer
(answer “a”), acceptance (answer “d”), and both of those things must be intentional (that’s what is meant by answer “b”, “reality of consent”.
Put another way, “the consent is real.”)
This is all part of the first two skills necessary to master for the entire real estate program:
1) Distilling all the definitions and rules down to their basic elements; and 2) then be able to apply that to a (tricky) question,
without being sidetracked by all the confusion confused in the question and the possible answers. (The last should always be accomplished
by the process of elimination – to find the best answer, given the facts of that particular question.)
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Quiz Question #3 - What does the question mean “falls under the Statute of Frauds”?
(OR What is the point of the Statute of Frauds in the first place?)
Part of the trick of the question (and therefore possible questions on the state license exam) is that by use of the term "Fraud", the examinee might
be inclined to automatically choose answer "d" - "an illegal contract".
But remember that "Statute of Frauds" is a term of law that arose from about 500 year-old English Common Law, when things didn't necessarily mean the same
thing they do now.
Here, the point of the Statute of Frauds was to prevent people to come back and say that they had a verbal agreement which they wanted the court to enforce.
So the English Parliament made up a list of things that the English courts weren't even allowed to "hear" (meaning that lawsuits couldn't even be
brought before the courts if they were trying to enforce a contract concerning one of the topics on the list.)
Examples of things that the courts
couldn't hear, because they were on the list were: contracts that could not be
performed in a year or less (such as a two-year lease of property); contracts for the sale of real property;
AND promises of marriage made for a promise of other consideration.... So all of these things would have
to be in writing, or the court would (and will to this day) throw out the case.
This is what is meant by UNENFORCEABLE - the court will not enforce it.
(The term "unenforceable", and the concept that it applies directly to the Statute of Frauds, will certainly be on the final exam, and the license exam!)
So... answer "a" is the correct answer because it is specifically listed by - “falls under” - the Statute of Frauds!
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Quiz Question #5 - It states "Which of the following is always essential to a contract?" When I read that, I see "contract," not "real estate contract," so I'm thinking this is about contracts in general.
Question #6 is deceivingly simple. The question does ask about a general contract! (but it applies equally well) When it says “Description of the property, it could mean real property or personal property. Either way, we would need to know the subject of the contract… Therefore “description of the property” would simply mean that we must describe the object being contracted for. Answers “b” and “c” are merely distractors – making the examiniee think that we are only talking about real property in this course, so it might be one of those answers… whereas they are just nonsense. Answer “d” is certainly in the realm or possibility since we are talking about any kind of contract – but it isn’t nearly as “true” as “a”, since “a” is so general and true in all cases. Bottom line is that when you get a question in a topic like, say, Contracts or Agency, where we may be talking about the general rule or real-property-specific: watch out for a trick, but don’t go overboard; usually the rule applies the same to a general item as it does to real property. (Although the provisions that apply to real property may add a few specifics, such as the Statute of Frauds applying specifically to contracts for the sale of real property – among other things.)
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