Contract questions test whether you understand when an agreement becomes binding and what happens when it fails. New York requires real estate contracts to be in writing under the Statute of Frauds, and the exam leans on the difference between a valid, void, voidable and unenforceable contract.
21 terms you need to know
- Acceptance
- Unqualified agreement to the terms of an offer. Any change creates a counter-offer instead and terminates the original offer.
- Accord and Satisfaction
- Settlement of a debt or dispute by agreeing to accept something different from what was originally owed.
- Assignment
- Transfer of contract rights or interests from one party to another. Compare with novation.
- Bilateral Contract
- A contract in which both parties exchange mutual promises. A real estate purchase contract is bilateral.
- Consideration
- Something of legal value exchanged between parties — money, services, a promise. Required for a valid contract.
- Contingency
- A condition that must be satisfied for a contract to remain binding. Common contingencies include financing, inspection, and appraisal.
- Counter-Offer
- A response that changes any term of an offer. It rejects the original offer and creates a new offer the original party can accept, reject, or counter.
- Default
- Failure to perform a contractual obligation — typically failure to make mortgage payments.
- Implied Contract
- A contract created by conduct rather than express words.
- Independent Contractor
- Most NY real estate salespersons work as independent contractors of their sponsoring broker rather than as employees, though the broker still supervises licensed activity.
- Land Contract
- An installment sale where the buyer takes possession but the seller retains legal title until the purchase price is paid in full.
- Liquidated Damages
- An amount agreed in advance to be paid by the breaching party — typically the buyer’s deposit is the seller’s liquidated damages if the buyer wrongfully defaults.
- Meeting of the Minds
- Mutual assent on all essential terms — a requirement for a valid contract.
- Novation
- Substitution of a new contract or new party for an old one, releasing the original obligor — different from assignment, which transfers rights but keeps the original obligor liable.
- Option Contract
- A contract giving the optionee the right (but not the obligation) to buy property within a set period for a set price, in exchange for consideration.
- Specific Performance
- A court remedy requiring a breaching party to perform the contract (deliver the deed) rather than just pay damages. Available when the property is unique.
- Statute of Frauds
- A rule requiring certain contracts (including most real estate contracts and leases over one year) to be in writing to be enforceable.
- Time Is of the Essence
- A contract clause making timely performance a strict condition. Without it, courts allow reasonable time.
- Unilateral Contract
- A contract where one party promises performance only if the other completes a specific act — e.g., an open listing or a reward.
- Vendor / Vendee
- Vendor = seller. Vendee = buyer (in a contract of sale).
- Voidable Contract
- A contract that one party may either enforce or rescind — typical for contracts involving minors or those induced by fraud.
Commonly confused
Void vs voidable
A void contract never existed in law — it cannot be enforced by anyone. A voidable contract is valid until the injured party chooses to cancel it, which is why contracts signed by a minor are voidable and not void.
Offer vs counter-offer
Any change to a term, however small, rejects the original offer and replaces it with a counter-offer. The original cannot then be accepted unless it is re-offered.
Assignment vs novation
An assignment transfers rights but keeps the original party liable. A novation substitutes a new party and releases the original one entirely.
How this is tested
Keep studying
- NY Real Estate Exam Topics: Complete Study Guide
- NY Real Estate Exam Vocabulary
- Free timed practice exam
- Full NY Real Estate Glossary — all 161 terms
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