North Dakota Real Estate Broker Exam — All Questions

A seller receives an offer and returns it with the price raised by $10,000 and everything else unchanged. In contract terms, the seller has made:

• a.An acceptance that binds the buyer
• b.An option contract
• c.A counteroffer that rejects the original offer✓
• d.A unilateral contract

Changing any material term, such as the price, is a counteroffer. A counteroffer rejects the original offer and becomes a new offer that the original offeror (the buyer) may accept or reject. There is no binding contract until one party accepts the other's terms exactly and communicates that acceptance. This is why a broker must train agents to track which offer is currently open, since multiple counteroffers can create confusion about the actual terms on the table.

A 16-year-old signs a contract to buy a house. How is that contract best classified?

• a.Void from the start
• b.Voidable at the minor's option✓
• c.Fully valid and enforceable
• d.Unenforceable by either party

A contract with a minor is generally voidable at the minor's option, meaning the minor may disaffirm it, while the adult party is bound unless the minor chooses to cancel. This differs from void (no legal effect at all, such as an illegal purpose) and from unenforceable (valid but barred from court enforcement, such as an oral land-sale contract). Capacity of the parties is one of the essential elements a broker should verify before funds move.

A seller signs a listing that owes the broker a commission if the property sells during the term no matter who finds the buyer, even the seller. This is a:

• a.Exclusive right-to-sell listing✓
• b.Exclusive agency listing
• c.Open listing
• d.Net listing

An exclusive right-to-sell listing pays the listing broker a commission if the property sells during the term regardless of who procures the buyer, including the owner. In an exclusive agency listing, the owner may sell it themselves without owing a commission. An open listing is nonexclusive and pays only the broker who actually procures the buyer. A net listing (banned in many states) sets the broker's pay as any amount above a net figure to the seller. The exclusive right-to-sell gives the broker the most protection.

A buyer breaches a signed purchase contract on a unique property, and the seller wants a court to force the buyer to complete the purchase. Which remedy is the seller seeking?

• a.Liquidated damages
• b.Rescission
• c.Novation
• d.Specific performance✓

Specific performance is a court order compelling a party to carry out the contract as agreed. It is available in real estate because each parcel of land is considered unique, so money damages may not be an adequate substitute. Liquidated damages is a pre-agreed sum (often the earnest money) the injured party keeps instead. Rescission cancels the contract and returns the parties to their starting positions. Novation substitutes a new contract or party for the original.

Under the statute of frauds, why must a contract for the sale of real estate generally be in writing to be enforceable?

• a.Because oral contracts are automatically void
• b.Because the statute requires certain contracts, including land sales, to be written and signed to be enforceable✓
• c.Because only written contracts contain consideration
• d.Because the buyer cannot take possession under an oral agreement

The statute of frauds requires that certain contracts, including those for the sale of an interest in real estate, be in writing and signed by the party to be charged in order to be enforceable in court. An oral land-sale contract is not automatically void; it is unenforceable, meaning a court will generally not enforce it if a party objects. Consideration can exist in oral contracts too. Written form is what makes the agreement enforceable, which is why brokers document terms carefully.

Substituting an entirely new contract for an existing one, or replacing one party with another and releasing the original party, is called:

• a.Assignment
• b.Rescission
• c.Novation✓
• d.Ratification

Novation is the substitution of a new contract or a new party for an old one, with the original obligation extinguished and the original party released. It differs from assignment, where a party transfers its rights but generally remains secondarily liable unless released. Rescission cancels the contract and restores the parties. Ratification is approving an act that was not originally authorized. Brokers see novation when a lender formally releases the original borrower and substitutes a new one on an assumed loan.

A listing agreement is signed by an agent on behalf of the brokerage. Legally, who is the seller's contract with?

• a.The brokerage (the broker), not the individual agent✓
• b.The individual agent personally
• c.Both the agent and the seller's attorney
• d.The multiple listing service

A listing agreement, like a buyer-broker agreement, is a contract between the client and the brokerage; the individual licensee signs on the broker's behalf. This is why listings belong to the broker and remain with the firm if the agent leaves, and why the broker is ultimately responsible for performing the agreement's duties. Understanding that the client contracts with the firm, not the salesperson personally, is central to how a broker supervises and stands behind the office's obligations.

A contract states that 'time is of the essence.' What is the effect of this clause?

• a.The parties may extend any deadline informally
• b.The contract has no fixed closing date
• c.Only the seller must meet deadlines
• d.The stated deadlines are strict and must be met exactly✓

A 'time is of the essence' clause makes the contract's deadlines strict, so a party who fails to perform by the stated date can be in breach even if only slightly late. It applies to both parties, not just one, and does not eliminate a closing date; it enforces it. Without such a clause, courts may allow a reasonable time to perform. Brokers should flag these clauses so clients and cooperating agents meet every date, because missing one can jeopardize the transaction.