Contracts questions test whether you understand what makes a real estate contract valid, what can make it void, and what happens when someone breaches.
Every valid contract requires: competent parties, mutual consent (offer and acceptance), lawful purpose, and consideration. In NY, real estate contracts must also satisfy the Statute of Frauds, meaning they must be in writing and signed to be enforceable.
A void contract has no legal effect from the start (e.g., a contract for illegal purposes). A voidable contract is valid but can be canceled by one party (e.g., a contract signed by a minor). An unenforceable contract may be valid but cannot be enforced in court (e.g., an oral real estate contract).
Contingencies are conditions that must be met for a contract to proceed. Common contingencies include financing, inspection, and appraisal. If a contingency is not satisfied, the buyer can typically cancel and recover the deposit.
When a party breaches a contract, the other party can seek damages (monetary compensation), specific performance (court-ordered completion of the sale), or rescission (canceling the contract). Specific performance is the most common remedy in real estate because every property is unique.
1. Which of the following must be in writing under the Statute of Frauds?
Real estate listing agreements must be in writing to be enforceable. Leases over 1 year also require writing, but a 6-month lease and personal property agreements do not.
2. A seller accepts a buyer's $600,000 offer in writing. Before closing, the seller receives a better offer and wants to back out. What remedy is uniquely available to the buyer?
Specific performance is available in real estate because each property is unique, so money alone can't make the buyer whole. A court can actually force the seller to complete the sale.
3. A 16-year-old signs a purchase contract for a condominium. This contract is:
A contract with a minor is voidable at the minor's option only. The adult cannot void it. If the minor reaches legal age and continues to honor the contract, they may have ratified it.
Consideration
Something of value exchanged between parties to form a valid contract, typically money, but can be any bargained-for promise or act.
Contract
A legally binding agreement between two or more parties that creates mutual obligations enforceable by law.
Earnest Money
A good-faith deposit made by the buyer when submitting an offer, demonstrating serious intent to purchase.
Power of Attorney
A legal document authorizing one person to act on behalf of another in legal or financial matters.
Specific Performance
A court order requiring a party who breached a real estate contract to actually complete the transaction.
Statute of Frauds
A law requiring certain contracts, including real estate sales contracts to be in writing to be enforceable.
Study Contracts in depth
Unlock the full study module with explanations, flashcards, and Carl, your AI tutor who can answer any question about this topic.
Start studying free →No credit card required
click for a haiku!