Contracts Practice Questions

Every question explained

Prefer to study at your own pace? Here are all 8 questions. Read each one and pick your answer, then reveal the correct answer, the reasoning, and the trap that catches most candidates.

1. 1. A buyer and seller shake hands on the sale of a vacant lot for 90,000 dollars. Nothing is put in writing. Before closing, the seller backs out. Can the buyer force the sale?

   • A.Yes, because a verbal agreement on price and property is a binding contract
   • B.Yes, because the buyer relied on the seller's promise
   • C.No, because under the Statute of Frauds a contract for the sale of real property must be in writing to be enforceable
   • D.No, because vacant land cannot be sold without a survey
   ▸Show answer and explanation

   Correct answer: C. No, because under the Statute of Frauds a contract for the sale of real property must be in writing to be enforceable

   Why C is correct: The Statute of Frauds requires that a contract for the sale of an interest in real property be in writing and signed by the party to be bound. An oral agreement to sell land is generally not enforceable in court, so the buyer cannot force the sale.

   Trap: The oral contract is unenforceable, not automatically void. The parties could still choose to perform; a court just will not force it.

   Source: F.S. 725.01, Statute of Frauds

2. 2. Which set lists the four essential elements every valid contract must have?

   • A.Earnest money, a licensed broker, a survey, and a closing date
   • B.Competent parties, mutual assent (offer and acceptance), legal purpose, and consideration
   • C.A written document, a notary, two witnesses, and recording
   • D.Offer, counteroffer, acceptance, and contingency
   ▸Show answer and explanation

   Correct answer: B. Competent parties, mutual assent (offer and acceptance), legal purpose, and consideration

   Why B is correct: A valid contract requires competent parties, mutual assent through offer and acceptance, a legal purpose, and consideration. Real estate contracts must also satisfy the Statute of Frauds by being in writing and signed, but the four core essentials are competency, mutual assent, legality, and consideration.

   Trap: Earnest money is not an essential element. Consideration is required, but the deposit itself is not.

   Source: Florida contract law; F.S. 725.01

3. 3. A buyer offers 320,000 dollars. The seller responds with a counteroffer at 335,000 dollars. The buyer then says, I accept your original 340,000 dollar listing price. Does a binding contract exist?

   • A.Yes, because the buyer agreed to a higher price than the seller asked in the counteroffer
   • B.Yes, because the listing price is a standing offer the buyer can accept anytime
   • C.No, because the seller's counteroffer terminated the buyer's original offer, and the buyer's new statement is itself a new offer the seller must accept
   • D.No, because the buyer already rejected the counteroffer, ending all negotiation permanently
   ▸Show answer and explanation

   Correct answer: C. No, because the seller's counteroffer terminated the buyer's original offer, and the buyer's new statement is itself a new offer the seller must accept

   Why C is correct: When the seller countered, the buyer's original offer was terminated. A listing price is an invitation to negotiate, not an offer the buyer can accept. The buyer's statement accepting 340,000 is a brand-new offer that the seller is free to accept or reject.

   Trap: A counteroffer kills the original offer. The buyer cannot reach back and accept something that is no longer on the table.

   Source: Florida contract law, offer and acceptance

4. 4. A 16-year-old signs a contract to buy a condominium. Under contract law, this agreement is

   • A.void, because a minor has no legal capacity to contract
   • B.voidable at the option of the minor, who may enforce it or disaffirm it
   • C.valid and fully binding on the minor
   • D.void, because real property cannot be sold to a minor
   ▸Show answer and explanation

   Correct answer: B. voidable at the option of the minor, who may enforce it or disaffirm it

   Why B is correct: A contract with a minor is voidable, not void. The minor may choose to enforce the contract or to disaffirm it. A void contract was never valid at all; a voidable contract is valid until the protected party elects to void it.

   Trap: Void and voidable are different. A minor's contract is voidable, giving the minor the choice, not void.

   Source: Florida contract law, capacity

5. 5. A seller signs a valid contract to sell a unique waterfront home, then refuses to close because she received a higher offer. The buyer wants the house, not money. The remedy that forces the seller to complete the sale is

   • A.liquidated damages
   • B.specific performance
   • C.rescission
   • D.novation
   ▸Show answer and explanation

   Correct answer: B. specific performance

   Why B is correct: Specific performance is a remedy that forces a party to complete the agreed transaction, available because real property is considered unique and money damages may not make the buyer whole. The buyer who wants the property itself seeks specific performance.

   Trap: Liquidated damages give money. Specific performance gives the property. Match the remedy to what the wronged party actually wants.

   Source: Florida contract remedies

6. 6. Buyer A assigns her purchase contract to Buyer B. Later, all three parties sign a new agreement that substitutes Buyer B for Buyer A entirely and releases Buyer A from any further liability. This release of the original party is accomplished through

   • A.assignment
   • B.novation
   • C.rescission
   • D.subrogation
   ▸Show answer and explanation

   Correct answer: B. novation

   Why B is correct: Novation substitutes a new party for an original party with the agreement of everyone involved, and it releases the original party from liability. A plain assignment transfers rights but usually leaves the assignor secondarily liable. The full release is what makes this a novation.

   Trap: The dividing line is the release. Assignment moves the rights; novation moves the party and ends the original party's liability.

   Source: Florida contract law, assignment and novation

7. 7. For 2,000 dollars, a seller gives a buyer the right, but not the obligation, to purchase a property at a set price within 90 days. The seller must sell if the buyer exercises the right, but the buyer is not required to buy. This is

   • A.a bilateral contract, because both parties make promises
   • B.a unilateral option contract, because only the seller is bound to perform if the buyer chooses to exercise
   • C.an exclusive right of sale listing
   • D.a voidable contract, because only one party is obligated
   ▸Show answer and explanation

   Correct answer: B. a unilateral option contract, because only the seller is bound to perform if the buyer chooses to exercise

   Why B is correct: An option contract is unilateral. The seller (optionor) is bound to sell if the buyer (optionee) exercises the option, but the buyer is not obligated to buy. Only one party has made an enforceable promise to perform, which is what makes it unilateral.

   Trap: An option is unilateral, not bilateral. The buyer holds a right, not an obligation, so only the seller is bound.

   Source: Florida contract law, option contracts

8. 8. A purchase contract states that if the buyer defaults, the seller keeps the earnest money as the agreed measure of damages. This clause is an example of

   • A.specific performance
   • B.liquidated damages
   • C.punitive damages
   • D.a novation clause
   ▸Show answer and explanation

   Correct answer: B. liquidated damages

   Why B is correct: A liquidated damages clause sets, in advance, the amount one party keeps if the other defaults. When a contract lets the seller retain the buyer's earnest money as the agreed damages on a buyer default, that is liquidated damages. The parties fixed the number ahead of time rather than proving actual loss.

   Trap: Liquidated means agreed in advance. Do not confuse it with specific performance, which forces the sale rather than awarding money.

   Source: Florida contract remedies