OREA Contract Law for Real Estate 1 — Questions and Answers
Question 1: What are the essential elements required to form a valid contract for the sale of real estate in Ontario?
- Only a written offer and acceptance
- Offer, acceptance, consideration, intention to create legal relations, capacity of parties, and legality of purpose (Correct answer)
- Only the signatures of the buyer and seller
- A verbal agreement and a handshake
Correct answer: Offer, acceptance, consideration, intention to create legal relations, capacity of parties, and legality of purpose
A valid real estate contract in Ontario requires all essential elements of contract law: a clear offer, unconditional acceptance, consideration (usually the purchase price), intention to be legally bound, legal capacity of all parties, and a lawful purpose.
Question 2: Under the Ontario Statute of Frauds, what is required for a contract for the sale of land to be enforceable?
- A verbal agreement is sufficient
- The contract must be in writing, signed by the party to be charged (Correct answer)
- Only a witness is needed for verbal agreements
- Electronic agreements are never enforceable
Correct answer: The contract must be in writing, signed by the party to be charged
The Statute of Frauds requires that contracts for the sale of land or any interest in land must be in writing and signed by the party against whom enforcement is sought. Verbal agreements for the sale of land are generally unenforceable.
Question 3: In Ontario, what is 'consideration' in a real estate contract?
- The seller's careful thought about whether to sell
- Something of value exchanged between the parties, typically the purchase price in exchange for the property (Correct answer)
- The time spent negotiating the deal
- The real estate agent's commission
Correct answer: Something of value exchanged between the parties, typically the purchase price in exchange for the property
Consideration is something of value that each party provides to the other. In a real estate contract, the buyer provides the purchase price (consideration) in exchange for the seller's transfer of the property (consideration). Both sides must give something of value.
Question 4: What happens when a buyer or seller lacks 'capacity' to enter into a real estate contract in Ontario?
- The contract is valid but at a higher price
- The contract may be voidable, meaning the party lacking capacity can choose to affirm or avoid the contract (Correct answer)
- The contract is automatically valid
- The real estate agent assumes responsibility
Correct answer: The contract may be voidable, meaning the party lacking capacity can choose to affirm or avoid the contract
If a party lacks legal capacity (e.g., a minor, a person of unsound mind, or an intoxicated person), the contract is generally voidable at the option of the incapacitated party. They can choose to affirm the contract when capacity is restored or avoid it.
Question 5: In Ontario real estate, what is the legal effect of a 'counter-offer'?
- It keeps the original offer alive while adding new terms
- It terminates the original offer and creates a new offer that the other party can accept or reject (Correct answer)
- It automatically extends the irrevocability period
- It has no legal effect until signed by both parties
Correct answer: It terminates the original offer and creates a new offer that the other party can accept or reject
A counter-offer legally terminates the original offer. It creates a new offer with modified terms that the other party can accept, reject, or counter. The original offer cannot be revived without a new offer being made.
Question 6: What is an 'irrevocable' period in an Ontario Agreement of Purchase and Sale?
- The period during which the buyer can withdraw without penalty
- The period during which the offer cannot be revoked by the offeror, giving the recipient time to consider it (Correct answer)
- The period after closing during which the deal can be undone
- A mandatory 10-day cooling-off period
Correct answer: The period during which the offer cannot be revoked by the offeror, giving the recipient time to consider it
The irrevocable period is the time during which the person making the offer agrees not to withdraw it. This gives the other party time to consider, negotiate, or accept the offer. Once the irrevocable period expires, the offer lapses if not accepted.
OREA Contract Law for Real Estate 1
What are the essential elements required to form a valid contract for the sale of real estate in Ontario?