CNE Contract Law & Agreement Drafting

Question 1

What is a 'contingency clause' in a real estate purchase agreement?

Accepted Answer

A condition that must be met for the contract to become binding

Answer

A penalty for late closing

Answer

A clause requiring the buyer to pay closing costs

Answer

A provision extending the contract term automatically

Question 2

Which of the following is NOT a required element for a contract to be legally enforceable?

Accepted Answer

Notarization

Answer

Offer

Answer

Acceptance

Answer

Consideration

Question 3

In contract law, 'consideration' is best defined as:

Accepted Answer

Something of value exchanged between parties to a contract

Answer

The price listed in the MLS

Answer

The agent's commission rate

Answer

The closing date agreed upon by both parties

Question 4

What does 'time is of the essence' mean when included in a real estate contract?

Accepted Answer

All deadlines in the contract are strictly enforced and material

Answer

The transaction must close within 30 days by law

Answer

The seller has priority over competing offers

Answer

The agent must respond to all offers within 24 hours

Question 5

Which type of contract clause limits a buyer's remedy if the seller defaults to retaining the earnest money deposit?

Accepted Answer

Liquidated damages clause

Answer

Indemnification clause

Answer

Acceleration clause

Answer

Subordination clause

Question 6

An 'as-is' clause in a purchase contract primarily serves to:

Accepted Answer

Shift the risk of known and unknown property defects to the buyer

Answer

Waive the buyer's right to conduct any inspections

Answer

Require the seller to disclose all material defects

Answer

Guarantee the buyer a lower purchase price

Question 7

A contract modification that changes one party's obligations must generally include what to be enforceable?

Accepted Answer

New consideration from the party benefiting from the change

Answer

Only the buyer's signature

Answer

Approval from the listing broker

Answer

A court filing within 10 business days