BASIC APPRAISAL PRINCIPLES REVIEW EXAM PAPER
QUESTIONS AND ANSWERS SURE A+
✔✔Unilateral Contract - ✔✔-one party makes a promise in order to induce another party
to do something, the second party is not legally obligated to comply
✔✔Executed Contract - ✔✔-one that has been fully performed & all promises fulfilled
according to the terms of the contract
✔✔Executory Contract - ✔✔-one that has not been fully performed or completed
Ex: a listing contract or a mortgage
✔✔Valid Contract - ✔✔-one that is binding and enforceable on all parties
Ex: a real estate deal that has cleared all contingencies but has not closed
✔✔Void Contract - ✔✔-one that has no legal force or effect even though it contains the
elements of a valid contract
-"null and void" because it contains some illegal element that could not be enforced
(racial discrimination) or some act in violation of legal use or an act of God (fire, flood)
✔✔Voidable Contract - ✔✔-one that results from the failure of the parties to meet some
legal requirement
-parties are not required to void the contract
✔✔Unenforceable Contract - ✔✔-one that appears to be valid but would not be
enforceable in court
Ex: one party tries to enforce an otherwise valid contract after the statute of limitations
has expired, contracts that are vague or poorly worded, verbal contracts where written
ones are required
-can be considered valid if both parties agree
✔✔List the 5 elements that make a valid contract binding and enforceable - ✔✔1)
Competent parties
2) Mutual agreement
3) Consideration
4) Lawful objective
5) In writing and signed
✔✔Competent - ✔✔1) in general, able to act in the circumstances, including the ability
to perform a job or occupation, or to reason or make decisions
*Competency: the mental ability to understand the general effect of a transaction or
document
-a contract is voidable if a party "by reason of mental illness or defect is unable to act in
a reasonable manner in relation to the transaction and the other party has reason to
know of this condition
,-a minor can hold an adult to a contract but an adult cannot hold a minor to a contract
✔✔Duress - ✔✔1) feebleness on one side, overpowering strength on the other
2) if a party's manifestation of assent is induced by an improper threat by the other party
that leaves the victim with no reasonable alternative, the contract is voidable by the
victim
✔✔Consideration - ✔✔1) payment or money. a vital element in the law of contracts,
consideration is a benefit which must be bargained for between the parties and is the
essential reason for a party entering into a contract. Consideration must be of value (to
the parties) and is exchanged for the performance or promise of performance by the
other party
2) any act of forbearance which is of benefit to the promisor or detriment to the
promisee
-must be something of value: money, property, promise to pay/perform, forbearance
(promise to refrain from something)
-courts can and will enforce promises that involve consideration
✔✔Parol Evidence Rule - ✔✔-written contracts take precedence over oral agreements
1) if there is evidence in writing such as a signed contract the terms of the contract
cannot be altered by evidence of oral (parol) agreements purporting to change, explain
or contradict the written document
✔✔Contracts can be terminated by: - ✔✔-agreement of parties
-performance of the contract
-impossibility of performance
-operation of law
✔✔Agreement of the Parties - Release - ✔✔1) to give up a right as releasing one from
his/her obligation to perform under a contract, or to relinquish a right to an interest in
real property
2) to give freedom
3) the writing that grants a release
✔✔Agreement of the Parties - Assignment - ✔✔1) the act of transferring an interest in
property or some right to another. Used commonly by lawyers, accountants, business
people, title companies and other dealing with property
✔✔Agreement of the Parties - Novation - ✔✔1) agreement of parties to a contract to
substitute a new contract for the old one.It cancels the old agreement. Often used when
the parties find that payments or performance cannot be made under the terms of the
original agreement or the debtor will be forced to default
-the only way any funds can be paid
-a new contract is created which terminates the original agreement and absolves the
original party from liability
,✔✔Performance of Contract - Execute - ✔✔1) to finish, complete or perform as
required, as in fulfilling one's obligations under a contract or a court order; to sign
otherwise complete a document
✔✔Performance of Contract - Time is of the essence clause - ✔✔1) a phrase often
used in contracts which in effect says:the specified time and dates in this agreement are
vital and thus mandatory and 'we mean it'. Therefore any delay-reasonable or not, slight
or not, will be grounds for canceling the agreement
-could have important ramifications and should be left to attorneys to interpret and apply
✔✔Impossibility of Performance - Impossibility - ✔✔-if a law changed after the contract
was arranged but before the full performance of the contract
-if a party dies or a property is destroyed this could be considered impossibility to
perform
✔✔Operation of Law - ✔✔-the application of law may change the rights and liabilities of
the parties without their consent
-contracts can be terminated by operation of law under: bankruptcy, statute of
limitations & alteration of contract
✔✔Interpretation - ✔✔1) where the parties attach the same meaning to the term used in
their agreement, the interpretation of the agreement should be in accord with that
meaning even if a third party might interpret the language differently
-no contract arises unless both parties have the same meaning in mind
✔✔Breach of Contract - ✔✔1) failing to perform any term of a contract, written or oral,
without a legitimate legal excuse
-one of the most common causes of lawsuits for damages or court ordered "specific-
performance" of the contract
-does not relieve the obligations of the breaching party
Ex. of legal remedies include: rescission, reformation, injunction, specific performance,
compensatory damages, consequential damages, attorney fees and costs, liquated
damages & punitive damages
✔✔Rescission - ✔✔1) the cancellation of a contract by mutual agreement of the parties
-may be applied when the contract has not been performed and there is a breach by
one party
✔✔Reformation - ✔✔1) the correction or change of an existing document by court order
upon petition of one of the parties to the document. Reformation will be ordered if there
is proof that the parties did not intend the language as written or there was an omission
due to mistake or misunderstanding
-may have been a clerical error
, ✔✔Injunction - ✔✔1) a writ issued by a court ordering someone to do something or
prohibiting some act after a court hearing
Ex: prohibitions against cutting trees, creating nuisances or polluting a stream
-'mandatory' injunctions may include returning of property, keeping a gate unlocked or
clearing off trees limbs from a right-of-way
✔✔Specific Performance - ✔✔1) the right of a party to a contract to demand that the
defendant be ordered in the judgment to perform the contract
Ex: when a defendant was to sell a property and did not, a judge may order the
defendant to actually complete the sale
-It is the opposite of recission
✔✔Compensatory Damages - ✔✔1) damages recovered in payment for actual injury or
economic loss, which does not include punitive damages
✔✔Consequential Damages - ✔✔1) damages claimed and/or rewarded in a lawsuit
which were caused as a direct foreseeable result of wrongdoing
-foreseeable means that each side should have reasonably known at the time of the
contract that there would be potential losses in the event of a breach
✔✔Attorney's fees and costs - ✔✔-only recoverable if they are expressly provided for in
the contract
✔✔Liquidated Damages - ✔✔1) an amount of money agreed upon by both parties to a
contract which one will pay to the other upon breaching the agreement or if a lawsuit
arises due to the breach
✔✔Punitive Damages - ✔✔1) damages awarded in a lawsuit as a punishment and
example to others for malicious, evil or particularly fraudulent acts
-these damages are reserved for the more serious acts such as fraud
-they are not recoverable for breach of contract even if the breach was willlful
✔✔Earnest Money - ✔✔1)something of value given by a buyer to a seller to bind a
bargain
✔✔If a seller defaults, a buyer may: - ✔✔1) Rescind the contract and recover the
earnest money deposit
2) File a suit calling for specific performance, to force the seller to sell the property
3) Sue the seller for compensatory damages
✔✔If a buyer defaults, a seller may: - ✔✔1) Declare the contract forfeited
2) Rescind the contract
3) Sue for specific performance
4) Sue for compensatory damages
QUESTIONS AND ANSWERS SURE A+
✔✔Unilateral Contract - ✔✔-one party makes a promise in order to induce another party
to do something, the second party is not legally obligated to comply
✔✔Executed Contract - ✔✔-one that has been fully performed & all promises fulfilled
according to the terms of the contract
✔✔Executory Contract - ✔✔-one that has not been fully performed or completed
Ex: a listing contract or a mortgage
✔✔Valid Contract - ✔✔-one that is binding and enforceable on all parties
Ex: a real estate deal that has cleared all contingencies but has not closed
✔✔Void Contract - ✔✔-one that has no legal force or effect even though it contains the
elements of a valid contract
-"null and void" because it contains some illegal element that could not be enforced
(racial discrimination) or some act in violation of legal use or an act of God (fire, flood)
✔✔Voidable Contract - ✔✔-one that results from the failure of the parties to meet some
legal requirement
-parties are not required to void the contract
✔✔Unenforceable Contract - ✔✔-one that appears to be valid but would not be
enforceable in court
Ex: one party tries to enforce an otherwise valid contract after the statute of limitations
has expired, contracts that are vague or poorly worded, verbal contracts where written
ones are required
-can be considered valid if both parties agree
✔✔List the 5 elements that make a valid contract binding and enforceable - ✔✔1)
Competent parties
2) Mutual agreement
3) Consideration
4) Lawful objective
5) In writing and signed
✔✔Competent - ✔✔1) in general, able to act in the circumstances, including the ability
to perform a job or occupation, or to reason or make decisions
*Competency: the mental ability to understand the general effect of a transaction or
document
-a contract is voidable if a party "by reason of mental illness or defect is unable to act in
a reasonable manner in relation to the transaction and the other party has reason to
know of this condition
,-a minor can hold an adult to a contract but an adult cannot hold a minor to a contract
✔✔Duress - ✔✔1) feebleness on one side, overpowering strength on the other
2) if a party's manifestation of assent is induced by an improper threat by the other party
that leaves the victim with no reasonable alternative, the contract is voidable by the
victim
✔✔Consideration - ✔✔1) payment or money. a vital element in the law of contracts,
consideration is a benefit which must be bargained for between the parties and is the
essential reason for a party entering into a contract. Consideration must be of value (to
the parties) and is exchanged for the performance or promise of performance by the
other party
2) any act of forbearance which is of benefit to the promisor or detriment to the
promisee
-must be something of value: money, property, promise to pay/perform, forbearance
(promise to refrain from something)
-courts can and will enforce promises that involve consideration
✔✔Parol Evidence Rule - ✔✔-written contracts take precedence over oral agreements
1) if there is evidence in writing such as a signed contract the terms of the contract
cannot be altered by evidence of oral (parol) agreements purporting to change, explain
or contradict the written document
✔✔Contracts can be terminated by: - ✔✔-agreement of parties
-performance of the contract
-impossibility of performance
-operation of law
✔✔Agreement of the Parties - Release - ✔✔1) to give up a right as releasing one from
his/her obligation to perform under a contract, or to relinquish a right to an interest in
real property
2) to give freedom
3) the writing that grants a release
✔✔Agreement of the Parties - Assignment - ✔✔1) the act of transferring an interest in
property or some right to another. Used commonly by lawyers, accountants, business
people, title companies and other dealing with property
✔✔Agreement of the Parties - Novation - ✔✔1) agreement of parties to a contract to
substitute a new contract for the old one.It cancels the old agreement. Often used when
the parties find that payments or performance cannot be made under the terms of the
original agreement or the debtor will be forced to default
-the only way any funds can be paid
-a new contract is created which terminates the original agreement and absolves the
original party from liability
,✔✔Performance of Contract - Execute - ✔✔1) to finish, complete or perform as
required, as in fulfilling one's obligations under a contract or a court order; to sign
otherwise complete a document
✔✔Performance of Contract - Time is of the essence clause - ✔✔1) a phrase often
used in contracts which in effect says:the specified time and dates in this agreement are
vital and thus mandatory and 'we mean it'. Therefore any delay-reasonable or not, slight
or not, will be grounds for canceling the agreement
-could have important ramifications and should be left to attorneys to interpret and apply
✔✔Impossibility of Performance - Impossibility - ✔✔-if a law changed after the contract
was arranged but before the full performance of the contract
-if a party dies or a property is destroyed this could be considered impossibility to
perform
✔✔Operation of Law - ✔✔-the application of law may change the rights and liabilities of
the parties without their consent
-contracts can be terminated by operation of law under: bankruptcy, statute of
limitations & alteration of contract
✔✔Interpretation - ✔✔1) where the parties attach the same meaning to the term used in
their agreement, the interpretation of the agreement should be in accord with that
meaning even if a third party might interpret the language differently
-no contract arises unless both parties have the same meaning in mind
✔✔Breach of Contract - ✔✔1) failing to perform any term of a contract, written or oral,
without a legitimate legal excuse
-one of the most common causes of lawsuits for damages or court ordered "specific-
performance" of the contract
-does not relieve the obligations of the breaching party
Ex. of legal remedies include: rescission, reformation, injunction, specific performance,
compensatory damages, consequential damages, attorney fees and costs, liquated
damages & punitive damages
✔✔Rescission - ✔✔1) the cancellation of a contract by mutual agreement of the parties
-may be applied when the contract has not been performed and there is a breach by
one party
✔✔Reformation - ✔✔1) the correction or change of an existing document by court order
upon petition of one of the parties to the document. Reformation will be ordered if there
is proof that the parties did not intend the language as written or there was an omission
due to mistake or misunderstanding
-may have been a clerical error
, ✔✔Injunction - ✔✔1) a writ issued by a court ordering someone to do something or
prohibiting some act after a court hearing
Ex: prohibitions against cutting trees, creating nuisances or polluting a stream
-'mandatory' injunctions may include returning of property, keeping a gate unlocked or
clearing off trees limbs from a right-of-way
✔✔Specific Performance - ✔✔1) the right of a party to a contract to demand that the
defendant be ordered in the judgment to perform the contract
Ex: when a defendant was to sell a property and did not, a judge may order the
defendant to actually complete the sale
-It is the opposite of recission
✔✔Compensatory Damages - ✔✔1) damages recovered in payment for actual injury or
economic loss, which does not include punitive damages
✔✔Consequential Damages - ✔✔1) damages claimed and/or rewarded in a lawsuit
which were caused as a direct foreseeable result of wrongdoing
-foreseeable means that each side should have reasonably known at the time of the
contract that there would be potential losses in the event of a breach
✔✔Attorney's fees and costs - ✔✔-only recoverable if they are expressly provided for in
the contract
✔✔Liquidated Damages - ✔✔1) an amount of money agreed upon by both parties to a
contract which one will pay to the other upon breaching the agreement or if a lawsuit
arises due to the breach
✔✔Punitive Damages - ✔✔1) damages awarded in a lawsuit as a punishment and
example to others for malicious, evil or particularly fraudulent acts
-these damages are reserved for the more serious acts such as fraud
-they are not recoverable for breach of contract even if the breach was willlful
✔✔Earnest Money - ✔✔1)something of value given by a buyer to a seller to bind a
bargain
✔✔If a seller defaults, a buyer may: - ✔✔1) Rescind the contract and recover the
earnest money deposit
2) File a suit calling for specific performance, to force the seller to sell the property
3) Sue the seller for compensatory damages
✔✔If a buyer defaults, a seller may: - ✔✔1) Declare the contract forfeited
2) Rescind the contract
3) Sue for specific performance
4) Sue for compensatory damages
