BC Real Estate Trading Services Course Law of Contracts Questions and Answers Flashcards
6 cards from real BC Real Estate Trading Services Course practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 BC Real Estate Trading Services Course Law of Contracts Questions and Answers flashcards as text
In British Columbia, which of the following is an essential element required for the formation of a legally binding contract for the purchase and sale of real estate?
Answer: A written agreement signed by the party against whom enforcement is sought.
In British Columbia, the Statute of Frauds requires that contracts dealing with an interest in land, such as a Contract of Purchase and Sale, must be in writing and signed by the party to be charged (the person against whom the contract is to be enforced) to be legally enforceable. Verbal agreements are generally insufficient for real estate transactions.
A buyer in Vancouver includes a 'subject to financing' clause in their Contract of Purchase and Sale. If the buyer acts in good faith but is unable to secure a mortgage approval from their bank after making reasonable efforts, what is the most likely outcome?
Answer: The contract becomes null and void, and the buyer is typically entitled to the return of their deposit.
A 'subject to financing' clause is a type of condition precedent (or 'subject clause') that protects the buyer. If the buyer makes genuine, reasonable efforts to satisfy the condition but fails, the condition is not met, and the contract does not become firm and binding. Consequently, the contract is terminated, and the deposit is usually returned to the buyer.
In a rising real estate market in BC, a seller accepts an offer but later refuses to complete the transaction, hoping to sell to another party for a higher price. Which of the following remedies is a buyer most likely to seek from the court?
Answer: Specific performance
Specific performance is a court order compelling a party to perform their contractual obligations. In real estate, since each property is considered unique, monetary damages may not be an adequate remedy for the buyer who wants that specific property. Therefore, a court may order the seller to complete the sale as agreed.
What is the key difference between an 'assignment' and a 'novation' of a Contract of Purchase and Sale in Canada?
Answer: A novation replaces the original contract with a new one, releasing the original party from their obligations, whereas an assignment transfers rights but may not release the original party from their obligations.
A novation extinguishes the original contract and creates a new one, substituting a new party and transferring both rights and obligations, thereby releasing the original party (the 'novator') from liability. An assignment transfers the rights and benefits of the contract to a new party (the 'assignee'), but the original party (the 'assignor') often remains liable for the performance of the contractual obligations if the assignee fails to perform.
A Contract of Purchase and Sale in British Columbia contains a clause stating 'Time is of the essence'. What is the legal significance of this clause?
Answer: It makes all dates and deadlines in the contract strictly enforceable, and a failure to perform on time is a breach of contract.
The 'Time is of the essence' clause means that all deadlines stipulated in the contract are strict conditions of the agreement. Missing a deadline, such as for subject removal or completion, even by a short period, constitutes a breach of contract and can give the non-breaching party the right to terminate the contract.
Which of the following scenarios best describes a breach of contract where the seller would be entitled to keep the buyer's deposit in a BC real estate transaction?
Answer: The buyer removes all subject clauses, making the contract firm and binding, but then refuses to complete the purchase on the agreed-upon completion date.
Once a buyer removes all subject clauses (conditions precedent), the Contract of Purchase and Sale becomes firm and legally binding on both parties. If the buyer then fails to complete the purchase as agreed (e.g., refuses to pay the purchase price), they are in breach of contract. In this situation, the seller's primary remedy is often to terminate the contract and keep the buyer's deposit as liquidated damages.