Contracts Practice Questions
287 questions on contracts, each with an explanation. This area covers offer and acceptance, contingencies, breach, addenda, discharge.
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A contract says an earnest deposit will be credited toward the purchase price. How should that deposit be treated at closing?
This quiz is a study aid, not the real exam. Our questions are written by us to match the published content outline. They are not actual exam questions, no score here predicts a pass, and this site is not affiliated with, endorsed by, or sponsored by PSI, Pearson VUE, ARELLO, any state real estate commission, or any government agency. Your state commission and your candidate handbook are the only authoritative sources.
10 sample contracts questions, answered
Every question above with its correct answer and the reasoning behind it. Read the explanations for the ones you answered correctly too. A lucky guess and knowing the rule look identical on a score report. These are sample questions from our larger bank.
1. A contract says an earnest deposit will be credited toward the purchase price. How should that deposit be treated at closing?
Why: A price credit recognizes funds already deposited. Counting the deposit as an extra charge would make the buyer pay it twice.
2. A clause states, "Time is of the essence in every provision of this agreement." Its practical effect is that:
Why: Such a clause means deadlines become strict, and even a short delay in performance can be a material breach. Saying deadlines become advisory, since courts allow a reasonable grace period describes the default rule the clause is designed to displace.
3. A buyer and seller sign an enforceable purchase agreement on May 1 and will close on June 12. During that interval the buyer holds:
Why: Under equitable conversion, a signed and enforceable contract gives the buyer equitable title while the seller keeps legal title until the deed is delivered. The buyer has a real, protectable interest during that period rather than a mere expectation.
4. A purchase agreement says a lender's appraisal is not a home inspection. Which assumption should the buyer avoid?
Why: An appraisal and a home inspection serve different purposes. The contract expressly warns against treating a value opinion as a comprehensive condition investigation.
5. A contract to sell real estate signed by a person who has been formally adjudicated mentally incompetent by a court is best described as:
Why: A prior judicial adjudication of incompetency makes the resulting contract void, meaning it never had legal existence. Calling it voidable by the incompetent party fits a person of questionable capacity who has not been adjudicated, where the contract exists until disaffirmed.
6. A contract required the seller to deliver a subdivided parcel, but a change in law made the subdivision legally impossible before closing. The seller's duty is most likely discharged by:
Why: A supervening legal prohibition discharges the duty through impossibility of performance, since no one could lawfully perform. Anticipatory repudiation by the seller would require the seller to refuse to perform a duty that remained possible.
7. A contract permits cancellation after a failed inspection only if notice identifies the failed item. The buyer sends a blank cancellation form. What is the concern?
Why: An express notice requirement may demand more than a cancellation label. The content should match the clause before the deadline.
8. A parent sells a house worth $340,000 to an adult child for $200,000, both signing willingly. A disappointed relative challenges the contract for lack of consideration. The likely outcome is that the contract is:
Why: Consideration must be legally sufficient, not equal in value, so competent parties may strike a bargain price and a court will not rewrite it for them. Undue influence has to be proven from facts about pressure and relationship, never inferred from price alone.
9. A buyer submits an offer that expires at 5:00 p.m. Friday. At 3:00 p.m. Friday the buyer telephones the seller and revokes. At 4:00 p.m. the seller signs and delivers acceptance. The result is:
Why: An offeror may revoke any time before acceptance, so there is no contract, because the offer was revoked before acceptance. Insisting on a binding contract, because acceptance was within the deadline ignores that a revoked offer no longer exists to accept.
10. A contract gives the seller five days to cure a title objection before cancellation. The buyer objects today. What should be checked before declaring termination?
Why: Contractual cure rights must be honored. An objection is not necessarily an immediate cancellation where the seller has an express opportunity to cure.
Where this weighting comes from
Weightings come directly from the test provider’s published examination content outline for the national portion of the salesperson exam. PSI publishes percentages only; Pearson VUE publishes scored-item counts only. PSI and Pearson VUE use different content taxonomies, so their weightings are not interchangeable and should not be averaged. Check which provider administers your state’s exam, and confirm against the current candidate handbook before you study. Outlines are revised periodically and older versions stay in circulation online. View the PSI outline.