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TN Real Estate practice questions

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Question 1Agency and Non-Agency Relationships

Under Tennessee real estate practice, the party who has entered into an agency agreement with a licensee and is owed fiduciary duties is best described as

  1. a subagent
  2. the licensee's customer
  3. a cooperating broker
  4. the licensee's client Correct answer.

Explanation

A client is the principal who has an agency relationship with the licensee and is owed fiduciary duties such as loyalty, confidentiality, and full disclosure. A customer receives services from the licensee but is not represented and is owed only honesty and fair dealing.

Question 2Agency and Non-Agency Relationships

Which fiduciary duty obligates a licensee to put the principal's interests ahead of the licensee's own interests?

  1. Reasonable care
  2. Accounting
  3. Obedience
  4. Loyalty Correct answer.

Explanation

Loyalty requires the licensee to act solely in the principal's best interest, avoiding self-dealing, undisclosed conflicts of interest, and secret profits. Accounting concerns money and documents, obedience concerns lawful instructions, and care concerns diligence and competence.

Question 3Agency and Non-Agency Relationships

Which of the following creates an agency relationship between a buyer and a Tennessee licensee?

  1. A buyer signing a receipt for an agency brochure
  2. A buyer touring an open house alone
  3. A signed written buyer representation agreement Correct answer.
  4. A licensee emailing listing alerts to a buyer

Explanation

Agency is created when the buyer authorizes the licensee to act on the buyer's behalf, and the parties document that authorization, including its term and compensation, in a written representation agreement. Touring property, acknowledging a disclosure, or receiving automated listing information does not by itself make the buyer a client.

Question 4Agency and Non-Agency Relationships

A licensee who represents both the buyer and the seller in the same transaction must

  1. obtain the informed written consent of both parties Correct answer.
  2. keep the dual role confidential from both parties until closing
  3. obtain only the managing broker's written permission
  4. withdraw from representing the seller before showing the property

Explanation

Dual agency is permitted only after full disclosure of the limits on the licensee's ability to advocate for either side, followed by the informed written consent of all parties. The consent must come from the parties themselves, not merely from the supervising broker.

Question 5Agency and Non-Agency Relationships

A homeowner pays a licensee a flat fee for a comparative market analysis but signs no listing or representation agreement. The payment of the fee

  1. makes the licensee a dual agent for the homeowner
  2. converts the market analysis into an exclusive listing
  3. requires the licensee to represent the homeowner in any later sale
  4. does not by itself create an agency relationship Correct answer.

Explanation

Compensation is not the test for agency; an agency relationship arises from authorization and consent, usually documented in a written brokerage agreement. A separately paid service such as a market analysis can be performed without any representation of the owner.

Question 6Agency and Non-Agency Relationships

A licensee who represents the seller is working with an unrepresented buyer. The licensee owes that buyer

  1. honesty and disclosure of material facts Correct answer.
  2. loyalty and full advocacy
  3. obedience to the buyer's instructions
  4. confidentiality of the buyer's financial information

Explanation

An unrepresented buyer is a customer of the licensee, so the licensee must deal honestly, disclose known material facts about the property, and avoid misleading the buyer. Loyalty, confidentiality, and obedience are fiduciary duties owed only to the licensee's own client.

Question 7Agency and Non-Agency Relationships

A written listing agreement that states a definite expiration date ends

  1. when the listing licensee changes brokerages
  2. when the seller removes the for-sale sign
  3. automatically on the stated expiration date Correct answer.
  4. when the seller rejects a full-price offer

Explanation

Agency terminates when the term stated in the brokerage agreement runs out, and a listing agreement should contain a definite expiration date. Rejecting an offer, moving to another brokerage, or removing a sign does not by itself end the term.

Question 8Agency and Non-Agency Relationships

Which event ends an agency relationship by operation of law?

  1. The principal dies Correct answer.
  2. The licensee raises the list price
  3. The principal leaves the state for the winter
  4. The principal signs a second listing with the same broker

Explanation

Death or incapacity of the principal terminates the agency by operation of law, as do destruction of the property and, in many circumstances, bankruptcy. Seasonal travel or routine marketing decisions do not end the relationship automatically.

Question 9Agency and Non-Agency Relationships

A licensee holding an exclusive right-to-sell listing wants to buy the listed property personally. The licensee should

  1. disclose the interest in writing and obtain the seller's consent Correct answer.
  2. make an offer through a straw buyer to hide the licensee's identity
  3. purchase through the licensee's own brokerage without telling the seller
  4. let the listing expire and buy without any disclosure

Explanation

Loyalty and full disclosure require the licensee to reveal a personal interest in the property and to obtain the principal's informed consent before contracting. Buying through a hidden party or waiting out the listing conceals the conflict and breaches fiduciary duty.

Question 10Agency and Non-Agency Relationships

The MLS offers a cooperating commission to the brokerage that brings a buyer. That offer of payment

  1. requires the buyer's licensee to share the buyer's confidential information
  2. creates a dual agency between the listing broker and the buyer
  3. does not make the buyer's licensee the seller's agent Correct answer.
  4. must be rebated in full to the buyer at closing

Explanation

Commission can flow from the seller or listing broker, but a licensee who represents the buyer remains the buyer's agent and does not become the seller's agent by accepting a cooperating fee. The fee arrangement should be disclosed to the buyer, but it does not shift the licensee's fiduciary allegiance.

Question 11Agency and Non-Agency Relationships

Two licensees at the same brokerage work on one transaction, one representing the buyer and one representing the seller. Under designated agency, this arrangement

  1. requires the seller to pay both licensees' commissions directly
  2. automatically makes the buyer's licensee a subagent of the seller
  3. may be permitted with written disclosure and consent Correct answer.
  4. is prohibited as undisclosed dual agency

Explanation

With designated agency, the broker assigns one licensee to represent the buyer and another to represent the seller, and each owes fiduciary duties only to its own client. The parties must receive disclosure and consent in writing, which distinguishes the arrangement from true dual agency.

Question 12Agency and Non-Agency Relationships

A licensee acting as a dual agent learns from the seller that the seller would accept $15,000 below list price. The licensee should

  1. keep it confidential from the buyer Correct answer.
  2. put the information in writing for both parties
  3. tell the buyer, so the buyer can offer less
  4. tell the buyer only if the buyer asks directly

Explanation

A dual agent may not use one party's confidential information to that party's detriment, so the seller's bottom line cannot be passed along to the buyer. The dual agent must protect each party's confidences while treating both fairly and disclosing material facts about the property.

Question 13Agency and Non-Agency Relationships

A listing agent receives three written offers on a property on the same day. The agent must

  1. hold the two lower offers until the highest is accepted
  2. present all offers promptly and let the seller decide Correct answer.
  3. return the lower offers to the buyers without showing the seller
  4. present only the highest offer to the seller

Explanation

The duty of disclosure requires the agent to present every offer promptly and objectively, regardless of price, and to let the seller make the decision. Withholding offers, even in the seller's supposed interest, deprives the seller of that choice.

Question 14Agency and Non-Agency Relationships

The buyer and seller dispute which of them is entitled to the earnest money deposit held by the brokerage. The licensee should

  1. hold the funds as the contract provides until the dispute is resolved Correct answer.
  2. return the entire deposit to the buyer immediately
  3. give the deposit to the seller because the seller paid the listing commission
  4. split the deposit equally between the two parties

Explanation

Earnest money must be handled as the purchase contract and brokerage policy direct, and the licensee may not unilaterally decide who prevails. Disputed funds are held until the parties agree in writing or a court or the commission directs their release.

Question 15Agency and Non-Agency Relationships

A seller tells the listing agent not to mention a known roof leak and to say the home has no defects. The agent should

  1. follow the instruction because obedience is a fiduciary duty
  2. say nothing about the roof and let the buyers inspect
  3. mention the leak only if a buyer asks about the roof
  4. refuse and disclose the known material defect Correct answer.

Explanation

Obedience requires following lawful instructions and never requires or permits misrepresentation or concealment of known material defects. The agent must disclose the defect truthfully and should explain to the seller why the instruction cannot be followed.

Question 16Agency and Non-Agency Relationships

Under an exclusive agency listing, the seller

  1. may sell personally without owing a commission Correct answer.
  2. may not sell the property without paying a commission
  3. must keep the property listed for at least one year
  4. owes a commission if a cooperating broker procures the buyer

Explanation

In an exclusive agency listing the seller keeps the right to sell the property personally without paying the broker, while the broker is still protected if another broker or the broker's own efforts produce the buyer. An exclusive right to sell, by contrast, entitles the broker to a commission even when the seller sells personally.

Question 17Agency and Non-Agency Relationships

A licensee shows a home to a buyer, and the buyer later purchases it through a different brokerage. The first licensee's entitlement to a commission generally turns on

  1. whether the buyer signed a disclosure receipt
  2. whether the licensee was the procuring cause Correct answer.
  3. whether the licensee showed the home first
  4. whether the licensee attended the closing

Explanation

A commission is ordinarily owed to the broker whose efforts were the procuring cause, meaning an uninterrupted series of events that produced a ready, willing, and able buyer. Being the first to show the property or attending the closing is not the legal test.

Question 18Agency and Non-Agency Relationships

A licensee representing the seller is showing the home to an unrepresented buyer. To avoid confusion, the licensee should

  1. clearly disclose that the licensee represents the seller Correct answer.
  2. promise the buyer that the buyer's comments will stay confidential
  3. avoid mentioning who the licensee represents
  4. advise the buyer on the maximum price to offer

Explanation

The licensee owes an unrepresented buyer honesty and a clear statement of whom the licensee represents, so the buyer does not mistakenly share confidential information or rely on the licensee for advocacy. Giving the buyer pricing advice or promising confidentiality would imply a representation that does not exist.

Question 19Agency and Non-Agency Relationships

A buyer who signed an exclusive buyer representation agreement with Broker A tours a home with Broker B and wants to write an offer with Broker B. The buyer should

  1. assume the agreement with Broker A is void because the buyer never met Broker A in person
  2. wait until Broker A's agreement expires and then buy
  3. resolve the existing agreement, which may still obligate the buyer, first Correct answer.
  4. write the offer with Broker B because Broker B showed the home

Explanation

An exclusive buyer representation agreement obligates the buyer to compensate Broker A for covered property even if the buyer works with another licensee during the term. The buyer should address the existing agreement, for example by obtaining a written release or Broker A's consent, before proceeding with Broker B.

Question 20Agency and Non-Agency Relationships

A licensee who does not represent a buyer reads the MLS square footage to the buyer at an open house. This conduct is best described as

  1. an act of undisclosed dual agency
  2. a ministerial act that creates no agency Correct answer.
  3. creating an implied agency relationship with the buyer
  4. a breach of loyalty owed to the buyer

Explanation

Providing factual information already available to the public is a ministerial act and does not by itself amount to representation or create an agency relationship. Agency arises from an agreement to represent a party, not from answering routine questions.

Question 21Agency and Non-Agency Relationships

In a brokerage that uses designated agency, the licensee representing the buyer learns that the buyer would pay well above list price. The licensee representing the seller

  1. must withdraw because such a conflict cannot be managed
  2. must be told by the buyer's licensee so the seller can hold firm
  3. is not automatically treated as knowing that information Correct answer.
  4. is deemed to know everything the buyer's licensee knows

Explanation

Under designated agency, the knowledge of one designated licensee is not imputed to the other, so the buyer's confidential pricing information stays on the buyer's side of the transaction. The broker supervises the arrangement, and the parties consent to it in writing after disclosure.

Question 22Agency and Non-Agency Relationships

A licensee who secretly represents both the buyer and the seller without disclosure and consent risks

  1. no consequence, because dual representation benefits both parties
  2. only a minor MLS fine for a paperwork error
  3. losing the right to compensation and facing disciplinary action Correct answer.
  4. having the title company void the deed automatically

Explanation

Undisclosed dual agency breaches the fiduciary duty of loyalty and violates agency disclosure requirements, so the licensee may forfeit the commission and be subject to discipline by the commission. Title companies do not set aside deeds on this basis.

Question 23Agency and Non-Agency Relationships

A buyer representation agreement expires without a sale. A new client, a seller, asks the licensee how much the former buyer was preapproved to borrow. The licensee should

  1. answer, because the agency relationship has ended
  2. decline, because the information stays confidential Correct answer.
  3. reveal the preapproval amount but not the buyer's income
  4. answer if the seller promises to keep it private

Explanation

The duty of confidentiality continues after the agency relationship ends, so a licensee may not use or reveal a former client's financial information. A promise of secrecy from a third party does not cure the breach.

Question 24Agency and Non-Agency Relationships

The seller offers the buyer's licensee a $2,000 bonus if the transaction closes within two weeks. The licensee should

  1. disclose the bonus and keep advice independent of it Correct answer.
  2. decline all compensation from the seller and rebate it
  3. urge the buyer to move quickly so the bonus is earned
  4. keep it without telling the buyer

Explanation

A licensee must disclose any compensation received in connection with the transaction and must not let it influence the advice given to the client. A quick-close incentive that pushes the buyer to waive inspections or contingencies would subordinate the buyer's interests to the licensee's.

Question 25Agency and Non-Agency Relationships

A property manager signs a one-year lease on an owner's behalf without authority. The owner later accepts the rent and performs under the lease. The owner's conduct

  1. creates a designated agency relationship
  2. ratifies the previously unauthorized act Correct answer.
  3. converts the manager into a dual agent
  4. has no effect because authority must exist before signing

Explanation

Agency by ratification arises when a principal, with knowledge of an unauthorized act, accepts its benefits or otherwise affirms it. The affirmance relates back and treats the act as authorized from the beginning.

Question 26Agency and Non-Agency Relationships

A broker and a seller sign a written agreement in which the seller authorizes the broker to market the property and the broker agrees to represent the seller's interests. This relationship is best described as:

  1. agency by operation of law
  2. agency by estoppel
  3. implied agency
  4. express agency Correct answer.

Explanation

Express agency exists when the client and the broker affirmatively state in words that the broker will act on the client's behalf; the agreement itself is the source of the relationship. It does not depend on the parties' conduct or on a third party's assumptions.

Question 27Agency and Non-Agency Relationships

A licensee represents a buyer under a signed buyer representation agreement. The buyer is out of town and asks the licensee to "just sign the offer for me" so it can be submitted that evening. The licensee should:

  1. explain that the licensee cannot bind the buyer by signing, and obtain the buyer's signature or a written power of attorney Correct answer.
  2. submit the offer unsigned and let the seller's agent collect the buyer's signature later
  3. sign the buyer's name and note on the offer that the buyer authorized it by phone
  4. sign as attorney-in-fact, because the buyer representation agreement already grants that authority

Explanation

A licensee's authority covers marketing, showing, and negotiating, but it does not include executing a contract in the client's name. To bind the buyer, the buyer must sign personally or appoint someone under a written power of attorney.

Question 28Agency and Non-Agency Relationships

A licensee represents a buyer client. At a showing, the seller's licensee confides that the foundation is failing and says the seller does not want it disclosed. The buyer's licensee should:

  1. report the other licensee to the commission before telling anyone else
  2. honor the confidence, because one licensee may not reveal another licensee's disclosures
  3. stay silent and simply urge the buyer to obtain a thorough home inspection
  4. tell the buyer what was learned, because the client is owed all material information Correct answer.

Explanation

A licensee owes the client full disclosure of material facts the licensee knows about the transaction, and that duty runs to the client rather than to other licensees. A request to keep a known structural defect "off the record" does not excuse withholding it from the buyer.

Question 29Contracts and Contract Law

Under Tennessee's statute of frauds, which of these agreements must be in writing to be enforceable?

  1. An oral agreement to buy a used car from a neighbor
  2. A contract for the sale of a house and lot Correct answer.
  3. An oral month-to-month residential lease
  4. An oral agreement to pay a landscaper for weekly mowing

Explanation

Tennessee's statute of frauds (T.C.A. § 29-2-101) requires a signed writing for any agreement for the sale of land, or for a lease of land for a term longer than one year. Agreements for services or for goods such as a used car fall outside that land provision.

Question 30Contracts and Contract Law

Which of the following is an essential element of a valid real estate contract?

  1. An earnest money deposit of at least one percent of price
  2. Notarized signatures of both parties
  3. Recording of the agreement in the county records
  4. Consideration Correct answer.

Explanation

A valid contract requires competent parties, mutual assent (offer and acceptance), consideration, legality of purpose, and whatever form the law requires. Recording, notarization, and a set percentage of earnest money are not elements of validity.

Question 31Contracts and Contract Law

An offeree mails a written acceptance of an offer that said nothing about the method of acceptance. Under general contract law, the contract is formed when:

  1. the acceptance is dispatched (mailed) Correct answer.
  2. the acceptance is recorded with the register of deeds
  3. the offeror receives the acceptance
  4. the offeror acknowledges receipt in writing

Explanation

Under the mailbox rule, an acceptance by a reasonable means is effective on dispatch, unless the offer specifies otherwise or the offer is protected by an option contract. Recording and any acknowledgment by the offeror play no role in formation.

Question 32Contracts and Contract Law

Earnest money in a residential sales contract primarily serves as:

  1. consideration showing the buyer's good faith Correct answer.
  2. a commission paid to the listing broker at closing
  3. a refundable deposit that carries no legal effect
  4. a penalty the seller may keep regardless of fault

Explanation

Earnest money is the buyer's consideration that demonstrates good-faith intent to perform; it is usually held in escrow and credited to the buyer at closing. It is not a commission, and it is not forfeited without regard to which party breached.

Question 33Contracts and Contract Law

A person who has been adjudicated incompetent and placed under a court-appointed guardian signs a contract to sell land. That contract is:

  1. voidable at the guardian's election
  2. void Correct answer.
  3. voidable only by the buyer
  4. valid and binding on all parties

Explanation

Once a person has been adjudicated incompetent and a guardian appointed, that person has no legal capacity to contract, and the agreement is void from the outset. Voidable contracts arise in other settings, such as contracts made by an unadjudicated person who may later be shown incompetent.

Question 34Contracts and Contract Law

In Tennessee, a person generally attains the legal capacity to enter into a binding contract at age:

  1. 21
  2. 18 Correct answer.
  3. 17
  4. 16

Explanation

Tennessee sets the age of majority at 18, so a person 18 or older may bind himself or herself by contract. Contracts made while under 18 are generally voidable by the minor.

Question 35Contracts and Contract Law

Because each parcel of real estate is treated as unique, the remedy a court most often grants a buyer when a seller wrongfully refuses to convey is:

  1. punitive damages
  2. a mechanic's lien
  3. rescission and restitution
  4. specific performance Correct answer.

Explanation

Land is regarded as unique, so money damages are an inadequate substitute for the promised conveyance. A court may therefore order the seller to perform the contract as written.

Question 36Contracts and Contract Law

The parol evidence rule generally prevents a party from:

  1. recovering earnest money after a failed contingency
  2. using prior oral statements to alter a complete written agreement Correct answer.
  3. assigning a real estate contract to a third party
  4. enforcing a written contract that is missing a notary's acknowledgment

Explanation

When the parties have reduced their full agreement to a final integrated writing, earlier negotiations and promises cannot be used to vary or contradict its terms. Exceptions exist for fraud, mistake, and ambiguity, but prior statements are not freely admissible.

Question 37Contracts and Contract Law

A buyer submits a written offer at $300,000. The seller responds in writing, "$310,000, all other terms unchanged." Before answering, the buyer tries to accept the original $300,000 offer. The result is:

  1. an enforceable option contract to buy at $300,000 for 30 days
  2. a binding contract at $300,000
  3. a binding contract at $310,000
  4. no contract; the counteroffer terminated the buyer's offer Correct answer.

Explanation

A counteroffer rejects and terminates the original offer, so the buyer's later attempt to accept the $300,000 terms is ineffective. The seller's counteroffer remains open until the buyer accepts it or it lapses.

Question 38Contracts and Contract Law

A seller grants a buyer a 30-day option to buy a parcel for $500 paid to the seller. On day 10 the seller receives a better offer and tells the buyer the option is withdrawn. May the seller withdraw?

  1. Yes, if the buyer has not yet inspected the property
  2. No; the option is a contract supported by consideration Correct answer.
  3. Yes, because a better offer automatically ends an option period
  4. Yes; an offer may be revoked any time before acceptance

Explanation

An option is itself a contract: the buyer paid $500 to keep the seller's offer open for the stated term. Because consideration was given, the offer cannot be revoked before the option period expires.

Question 39Contracts and Contract Law

In a novation, the original party to a contract:

  1. is released and replaced by a new party who is accepted by all Correct answer.
  2. must keep performing until closing
  3. assigns only the contract's benefits
  4. remains secondarily liable as a surety

Explanation

A novation substitutes a new party and discharges the original party, and it requires the consent of everyone involved. A simple assignment, by contrast, leaves the assignor liable.

Question 40Contracts and Contract Law

A contract provides that if the buyer defaults, the seller keeps the $50,000 earnest money as liquidated damages, although the seller's actual damages would be about $5,000. A court is most likely to:

  1. enforce the clause because the parties agreed to it in writing
  2. treat the clause as a penalty and award actual damages Correct answer.
  3. award the $50,000 plus actual damages
  4. reform the contract to add a financing contingency

Explanation

A liquidated damages clause is enforceable only if the stipulated sum is a reasonable forecast of probable loss at the time of contracting. A figure ten times the anticipated harm is a penalty and will not be enforced.

Question 41Contracts and Contract Law

A buyer's offer includes a loan contingency requiring a 30-year fixed mortgage at or below 6.5% within 30 days. The buyer applies and is approved only at 7.25%. The buyer may generally:

  1. cancel only if the seller agrees
  2. cancel under the contingency and recover the earnest money Correct answer.
  3. not cancel, because a loan was approved
  4. demand that the seller reduce the price by the difference in interest

Explanation

The contingency defines the loan the buyer agreed to accept. A loan at a higher rate than the contingency allows does not satisfy it, so the buyer may terminate and recover the deposit if the buyer acted in good faith.

Question 42Contracts and Contract Law

A clause stating that "time is of the essence" means that:

  1. dates in the contract are approximate and may be extended at will
  2. the stated dates are enforceable and a delay is a breach Correct answer.
  3. only the closing date is enforceable
  4. the contract is void if any deadline is missed

Explanation

A time-is-of-the-essence provision makes the scheduled dates material, so late performance can be treated as a breach. Without such a clause, courts often allow a reasonable extension of time.

Question 43Contracts and Contract Law

After a sales contract is signed, the parties agree to change the closing date. To be enforceable, the change should be:

  1. announced at closing
  2. set out in a written amendment signed by both parties Correct answer.
  3. recorded with the county register of deeds
  4. confirmed only by a phone call between the agents

Explanation

A contract for the sale of land must be evidenced by a signed writing, and a material modification must meet the same requirement. An oral change or a conversation between agents does not bind the principals.

Question 44Contracts and Contract Law

Ten days before closing, the buyer sends written notice that he will not complete the purchase under any circumstances. The seller may:

  1. sue the buyer's agent for the lost commission
  2. treat it as an anticipatory breach and sue now for damages Correct answer.
  3. do nothing but wait for the closing date to pass, because no breach has occurred yet
  4. keep the earnest money immediately as liquidated damages without any further action

Explanation

A clear, unequivocal refusal to perform before the due date is an anticipatory repudiation, which lets the injured party treat the contract as breached immediately. The seller may sue at once rather than waiting for the closing date.

Question 45Contracts and Contract Law

Both buyer and seller believe a 20-acre parcel can be subdivided; in fact, a recorded deed restriction prohibits subdivision. This is:

  1. unilateral mistake, so the contract stands
  2. an impossibility that automatically transfers title
  3. fraud by the seller
  4. a mutual mistake of material fact that may allow rescission Correct answer.

Explanation

When both parties share the same erroneous belief about a fact basic to the bargain, the mistake is mutual and material, and a court may rescind. Unilateral mistake, by contrast, generally does not relieve the mistaken party.

Question 46Contracts and Contract Law

A seller knows the basement floods, paints over the stains, and tells the buyer the basement is "perfectly dry." The buyer may:

  1. rescind the contract because of the seller's fraudulent misrepresentation Correct answer.
  2. do nothing, because the buyer should have inspected
  3. recover only the cost of the paint
  4. enforce the contract but must wait one year to sue

Explanation

A knowing false statement of a material fact on which the buyer justifiably relies is fraudulent misrepresentation, which makes the contract voidable at the buyer's election. The buyer may rescind and seek restitution rather than being locked into the purchase.

Question 47Contracts and Contract Law

A financing contingency in a sales contract is best described as:

  1. a covenant of quiet enjoyment
  2. an exculpatory clause
  3. a condition precedent Correct answer.
  4. a liquidated damages clause

Explanation

A contingency is a condition precedent: the buyer's duty to close does not arise unless the stated event (obtaining the described loan) occurs or the condition is waived. Failure of the condition excuses the buyer's performance.

Question 48Contracts and Contract Law

At closing, the buyer appears with certified funds and signed documents, but the seller fails to appear. The buyer has:

  1. waived all rights under the contract
  2. breached the contract
  3. automatically received title by operation of law
  4. tendered performance and may sue the seller Correct answer.

Explanation

Tender is an unconditional offer to perform, and a party who tenders is not in default. Having tendered, the buyer may pursue remedies such as specific performance or damages against the nonperforming seller.

Question 49Contracts and Contract Law

An oral agreement to sell land is never reduced to a signed writing, but the buyer pays the full price, takes possession, and builds a garage with the seller's knowledge. A Tennessee court is most likely to:

  1. consider enforcing the oral agreement if the buyer's conduct is unequivocally referable to it Correct answer.
  2. refuse to enforce the agreement because the statute of frauds requires a signed writing in every case
  3. void the agreement and order the seller to keep the improvements
  4. enforce the oral agreement only if the price was below $50,000

Explanation

Part performance is a recognized exception to the statute of frauds when the acts relied on point unmistakably to the alleged agreement and denying enforcement would work a fraud. Possession, payment, and improvements are the classic indicia courts examine.

Question 50Contracts and Contract Law

A buyer under a Tennessee land installment contract (contract for deed) has made 40 of 60 monthly payments when she stops paying. Which statement is most accurate?

  1. The buyer automatically receives title once 25 percent is paid
  2. A court may treat the transaction as security and require foreclosure instead of forfeiture Correct answer.
  3. The seller may keep all prior payments with no further obligation
  4. The contract is void because no deed was delivered at signing

Explanation

In a contract for deed the seller keeps legal title while the buyer builds equity through payments. Because the arrangement functions as security for the unpaid price, courts may require the seller to foreclose and account for the buyer's equity rather than declare a total forfeiture.