Real estate contracts are sorted on four scales: express or implied, bilateral or unilateral, executed or executory, and valid, void, voidable or unenforceable. Contracts are the largest area of the PSI national portion at 19%. Pearson VUE gives them 9 of its 80 scored questions and counts agency in the same outline area, which this hub covers on agency.
Updated Oct 24, 2026 · Not affiliated with any state commission or test provider.
9of 80 scored, Pearson VUE
19%of the PSI national portion
18questions on this page
Types of real estate contracts
Express vs implied: stated in words, written or oral, vs shown by conduct.
Bilateral vs unilateral: a promise for a promise (a purchase agreement, an exclusive listing) vs a promise that binds only one side until the other acts. An option is unilateral: the optionor must sell if the optionee exercises, and the optionee need not buy.
Executed vs executory: fully performed vs still to be performed. A signed purchase contract is executory until closing.
Valid, void, voidable, unenforceable: valid has every element; void has none of the force of a contract (an illegal purpose); voidable can be canceled by one party (a minor, fraud, undue influence); unenforceable is valid but cannot be sued on, such as an oral contract for land.
Contracts the outlines name by type: the purchase (sales) agreement, the option, the installment or land contract (contract for deed), the lease and lease-purchase, and the listing and buyer agreements, which belong to agency.
Five elements of a valid contract
Pearson VUE’s outline lists them in this order (IV.B):
Voluntary: freely made, without fraud, duress or undue influence.
Agreement: an offer and an acceptance of the same terms. A counteroffer rejects the offer it answers.
Legally competent parties: of legal age and sound mind.
Lawful consideration: something of value exchanged, such as money or a promise.
Legal purpose: a contract to do something illegal is void.
18 contract questions
0 of 18 answered · 0 correct
Question 1 of 18 · Contracts · 9 items
A buyer and seller make an oral agreement for land. The buyer moves in, makes significant structural improvements, and pays half the purchase price. If the seller cancels, which equitable remedy might compel the conveyance despite the Statute of Frauds?
Answer and explanations
Correct: Payment, possession and improvements made in reliance on the oral deal are part performance, which lets a court order specific performance despite the Statute of Frauds.
Incorrect: Constructive eviction is a landlord-tenant doctrine and has nothing to do with enforcing a purchase.
Incorrect: Strict foreclosure is a lender's remedy against a defaulting borrower, not a buyer's way to get title.
Incorrect: Liquidated damages come from a contract clause and are money, not an order forcing the conveyance.
Incorrect: Quiet enjoyment is a tenant's covenant against the landlord, not a remedy for a buyer under a sale.
Question 2 of 18 · Contracts · 9 items
A purchase contract includes an inspection contingency. After inspection, the buyer terminates and demands return of earnest money. The seller claims bad faith and demands the funds, with both giving conflicting oral instructions. What must the broker do?
Answer and explanations
Incorrect: Moving client funds into the operating account is commingling.
Incorrect: One party's oral claim does not authorize release when the other party objects.
Incorrect: Splitting the money is a disbursement neither party authorized.
Correct: With conflicting claims, the broker holds the deposit in the trust account until both parties sign a written release or a court decides.
Incorrect: The buyer's oral demand is not authority to release disputed funds.
Question 3 of 18 · Contracts · 9 items
Shortly after closing, a buyer discovers severe chemical contamination that the seller actively and fraudulently concealed. If the buyer wishes to completely unwind the transaction, which remedy should they pursue?
Answer and explanations
Incorrect: Mutual mistake means both parties were wrong about a fact; here the seller knew and hid it.
Incorrect: Damages compensate the buyer but leave the sale in place, so they do not unwind it.
Correct: Rescission undoes the sale and returns both sides to where they started, which is what the buyer wants after fraud.
Incorrect: Liquidated damages are a pre-agreed sum a party collects for breach; they do not unwind the sale.
Incorrect: Specific performance forces a deal to go forward, the opposite of unwinding it.
Question 4 of 18 · Contracts · 9 items
A purchase contract designates the $5,000 earnest money as the sole liquidated damages remedy. The buyer breaches. The seller suffers $20,000 in actual damages and sues for the remaining $15,000. How will a court likely rule?
Answer and explanations
Incorrect: Part performance concerns oral land contracts, not damages after a buyer's breach.
Incorrect: Brokers have no share in the seller's damages claim; any split is set by the listing agreement.
Correct: When the earnest money is the agreed sole remedy, the seller keeps the $5,000 and cannot sue for more.
Incorrect: A sole-remedy clause bars suing for actual damages, even if they are larger.
Incorrect: The seller does not have to return the deposit; the clause entitles the seller to keep it.
Question 5 of 18 · Contracts · 9 items
Seller refuses to close on a unique residential property after buyer performs all obligations. Which remedy would a court most likely grant?
Answer and explanations
Incorrect: Rescission returns the buyer's money but gives up the house the buyer wants.
Incorrect: Punitive damages are not a remedy for a simple breach of contract.
Correct: Land is treated as unique, so a buyer who performed can ask a court to order the seller to convey.
Incorrect: Money damages are available, but they rarely make a buyer whole for a unique property.
Incorrect: No liquidated damages clause is mentioned, and such clauses protect the seller, not the buyer.
Question 6 of 18 · Contracts · 9 items
Seller offers to sell for $260,000. Buyer counters at $250,000. Seller rejects the counteroffer. Buyer then tries to accept Seller's original $260,000 offer. What is the contract status?
Answer and explanations
Incorrect: No contract formed at all, so there is nothing voidable.
Incorrect: The counteroffer was rejected, so it binds no one.
Incorrect: Courts do not invent a middle price; no one agreed to $255,000.
Correct: The buyer's counteroffer rejected and ended the seller's offer, so there is nothing left to accept and no contract exists.
Incorrect: A rejected offer is gone; it is not revived by a later attempt to accept it.
Question 7 of 18 · Contracts · 9 items
A buyer completes a home inspection and then signs a written waiver of the inspection contingency. Two weeks later, before closing, the buyer discovers a latent structural defect and demands termination and return of earnest money. The seller refuses, arguing the contingency was waived. Which outcome is most likely?
Answer and explanations
Incorrect: An implied warranty theory does not override the buyer's written waiver of this contingency.
Incorrect: A waiver given as part of an ongoing contract does not need separate consideration.
Incorrect: A waived contingency does not come back because of a later discovery.
Correct: Once the buyer waived the inspection contingency in writing, it cannot be used later to cancel, even after finding a defect.
Question 8 of 18 · Contracts · 9 items
During a commercial lease dispute, a landlord intentionally removes essential, customized HVAC equipment installed by the tenant, rendering the building unusable for the tenant's business. What legal concept does the landlord's action most likely demonstrate?
Answer and explanations
Incorrect: Actual eviction means physically removing the tenant, which did not happen.
Incorrect: Trade fixtures belong to the tenant, so the landlord's removal is not lawful conversion.
Correct: Making the premises unusable through the landlord's own act breaches the covenant of quiet enjoyment and is a constructive eviction.
Incorrect: The tenant did not leave voluntarily; the landlord's act made the space unusable.
Incorrect: Distraint seizes a tenant's goods for unpaid rent, and no unpaid rent is mentioned.
Question 9 of 18 · Contracts · 9 items
A seller's MLS listing states that a hard-wired standby generator mounted on a concrete pad is excluded from the sale, but the purchase contract is silent about the generator. The seller removes the generator before closing. The buyer claims the generator is a fixture and should convey. Which document controls?
Answer and explanations
Incorrect: Trade fixtures belong to tenants; the buyer only needs to show an ordinary fixture.
Correct: The purchase contract is the agreement between buyer and seller; it does not exclude this attached generator, so the fixture conveys.
Incorrect: A permanently mounted, hard-wired generator is a fixture, not personal property the seller can take.
Incorrect: An MLS remark is advertising, not a term of the buyer's contract.
Incorrect: The listing agreement is between seller and broker; it does not bind the buyer.
Question 10 of 18 · Contracts · 9 items
A buyer and seller enter into a purchase contract. The buyer pays $500 for a home inspection. Before closing, the seller wrongfully refuses to sell and terminates the contract. The buyer does not close. What damages can the buyer recover?
Answer and explanations
Incorrect: A buyer who never closed because the seller backed out can still recover for the seller's breach.
Incorrect: Specific performance is an equitable remedy, not damages, and the stem asks about damages.
Incorrect: Punitive damages are not a remedy for an ordinary breach of contract.
Correct: A breaching seller owes the buyer compensatory damages, which include costs such as the inspection fee spent in reliance on the deal.
Incorrect: The buyer can recover more than the deposit when the seller breaches.
Question 11 of 18 · Contracts · 9 items
A seller intentionally misrepresents the condition of a septic system in a property sale. The buyer discovers the fraud after closing and sues. Which statement best describes the damages the buyer may recover?
Answer and explanations
Incorrect: Fraud supports a tort claim, so punitive damages are not ruled out just because there is a contract.
Correct: Fraud is a tort as well as a breach, so the buyer can recover compensatory damages and, for intentional fraud, possibly punitive damages.
Incorrect: Punitive damages are never automatic; the court decides based on the conduct.
Incorrect: A defrauded buyer can choose damages; rescission is not the only remedy.
Question 12 of 18 · Contracts · 9 items
A real estate agent breaches both a fiduciary duty and a contract term, causing a client a single $10,000 loss. The client sues for breach of fiduciary duty and breach of contract. What amount of compensatory damages can the client recover?
Answer and explanations
Incorrect: Suing on two theories does not double recovery for the same harm.
Incorrect: The loss is not split between theories; it is recovered in full once.
Correct: Compensatory damages make the client whole for the actual loss, so one $10,000 loss is recovered once.
Incorrect: Compensatory damages are $10,000; punitive damages are not compensation.
Incorrect: The client proved a $10,000 loss, so recovery is not zero.
Question 13 of 18 · Contracts · 9 items
Under a traditional installment land contract with a forfeiture clause, in a state that adds no statutory protection for land-contract buyers, a buyer defaults. Which statement correctly compares the buyer's position to that of a defaulting mortgagor?
Answer and explanations
Correct: Under a forfeiture clause the seller keeps title and the payments, without the foreclosure and redemption steps a mortgagor gets.
Incorrect: Mortgage protections are not automatic for a land contract in this state.
Incorrect: The forfeiture clause lets the seller end the contract without judicial foreclosure.
Incorrect: A land-contract buyer here does not have a mortgagor's foreclosure protections.
Incorrect: The buyer has equitable title and contract rights, but forfeiture can end them quickly.
Question 14 of 18 · Contracts · 9 items
An isolated elderly woman signs deed transferring $300,000 lakefront property to live-in caregiver for $10,000. She later seeks to rescind. Which defense is most appropriate, and what remedy?
Answer and explanations
Incorrect: Undue influence fits, but money damages do not give her the land back.
Incorrect: There was no threat or force, and emotional distress damages do not undo the deed.
Correct: A dependent elderly owner signing over valuable property to a caregiver for a fraction of its value fits undue influence, and the remedy is rescission of the deed.
Incorrect: Duress requires threats or force, which the facts do not show.
Incorrect: Fraud needs a false statement, and punitive damages do not return the land.
Question 15 of 18 · Contracts · 9 items
Before closing, a buyer discovers the seller fraudulently concealed major roof damage. Which remedy is most appropriate for the buyer?
Answer and explanations
Incorrect: Taking possession and suing for rent makes no sense for a buyer facing a fraud before closing.
Incorrect: Signing the contract does not waive a fraud claim against the seller.
Correct: Fraud discovered before closing lets the buyer rescind the contract and get the earnest money back.
Incorrect: A liquidated damages clause limits what a seller collects from a defaulting buyer; it is not a buyer's remedy for fraud.
Incorrect: The buyer is the victim of fraud and has no reason to give up the deposit.
Question 16 of 18 · Contracts · 9 items
A buyer's lender requires certification that the radon mitigation system was installed by a certified professional before closing. The seller's system is not certified, and the seller refuses to pay for certification. The buyer's agent tells the buyer, "Don't worry; the lender will waive that requirement." This statement is:
Answer and explanations
Incorrect: No law requires a seller to provide a certified radon system; the requirement is the lender's.
Correct: A lender condition is not something the agent can promise away; the agent should explain how the financing contingency and an extension protect the buyer.
Incorrect: Promising a lender will waive a condition is a guess the agent cannot back up.
Incorrect: The seller's refusal does not make the lender's condition unenforceable.
Incorrect: An agent has no power to demand that a lender drop its underwriting condition.
Question 17 of 18 · Contracts · 9 items
A buyer enters a valid contract to buy a seller's property but defaults without cause. The seller promptly relists and sells the property to a different buyer at a lower price, incurring additional carrying costs and a second commission. Which measure of damages may the seller recover from the defaulting buyer?
Answer and explanations
Incorrect: Reselling for less reduces the loss but does not erase it.
Incorrect: Without a liquidated damages clause, the seller is not limited to the deposit.
Incorrect: Incidental costs caused by the breach, such as carrying costs and a second commission, are recoverable.
Incorrect: The seller still owns the property after resale, so recovering the full contract price would overcompensate.
Correct: The seller recovers the gap between the contract price and the resale price plus incidental costs such as carrying costs and the second commission.
Question 18 of 18 · Contracts · 9 items
A seller breaches a valid sales contract. The buyer initially threatens to sue for specific performance but subsequently signs a mutual release with the seller to reclaim their earnest money from escrow. What is the legal effect of this action?
Answer and explanations
Incorrect: The escrow agent followed signed release instructions and has no liability for the buyer's damages.
Incorrect: A release ends the parties' obligations, so the buyer does not keep a right to demand specific performance.
Correct: Signing a mutual release to get the deposit back ends the contract, so the buyer gave up the right to specific performance.
Incorrect: A released claim cannot be converted into punitive damages.
Incorrect: The release ended the dispute, so there is no automatic penalty on the seller.
Answer every question to see your score
Writing, performance and remedies
The Statute of Frauds requires contracts to buy or sell real estate to be in writing and signed to be enforceable; electronic records and signatures count under the federal E-SIGN Act and state laws. “Time is of the essence” makes the stated dates strict deadlines.
When one side breaches, the other can choose among:
Specific performance: a court orders the sale itself, available because every parcel is unique.
Compensatory damages: money for the actual loss; punitive damages only for conduct such as fraud.
Liquidated damages: an amount agreed in advance, typically the earnest money. When the contract makes it the sole remedy, the seller keeps it and gets nothing more.
Rescission: the contract is undone and both sides are put back where they started, the usual remedy for fraud or misrepresentation.
In a sales contract, the buyer gets equitable title at signing and legal title at closing. Contingencies (inspection, financing, appraisal, sale of a home) let a party leave without breach if the condition fails. Earnest money held by a broker is released by the parties’ written agreement or a court, a duty explained on real estate practice. State forms and deadlines are a state topic, such as Arizona contracts and escrow.
Void, voidable and unenforceable are three different answers
A contract signed by a minor is voidable by the minor, not void. An oral contract for land is unenforceable, not void: if both sides perform, the sale stands. A contract for an illegal purpose is void from the start, and nobody can enforce it.
Voluntary assent, an offer and acceptance, legally competent parties, lawful consideration and a legal purpose. To be enforceable, a contract to buy or sell land must also be in writing.
Is an option contract bilateral or unilateral?
Unilateral. The optionor is bound to sell on the stated terms; the optionee may exercise the option or let it lapse.
How much of the national portion is contracts?
PSI: 19%, its largest area. Pearson VUE: 9 of 80 scored questions, with agency counted separately on this hub.