Illinois exam glossary
Executory contract
A purchase agreement can be signed on Monday and still have weeks of work ahead. The buyer may owe funds and the seller may owe a conveyance. Executory describes that unfinished performance. It does not mean the parties are free to walk away.
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The short answer
An executory contract has performance still due from one or both parties. A binding real estate purchase agreement is commonly executory between acceptance and completion of the promised exchange. Executed can mean signed or performed, depending on context. A signature, earnest-money payment or recorded document alone does not establish that every contractual obligation has been completed.
Reviewed October 25, 2026. PSI covers contract execution at National V.A.9 and party rights and obligations at V.A.11, within the 19-question Contracts domain. Those are topic references, not a question quota for this page. This lesson uses ordinary contract vocabulary and the identified Illinois rules, not a specialized bankruptcy definition. Original practice is educational and does not decide a live contract, title claim or remedy.
Read the agreement as a sequence of promises
- Establish the agreement first. Identify the parties, property, assent, authority and applicable writing requirements. A page with signatures is not proof that every formation or enforceability issue has been resolved. The examples that call a contract binding assume those issues are satisfied.
- List what each party still owes. Use the actual contract for earnest money, financing efforts, inspections, access, notices, title, purchase funds, deed and possession. These are possible obligations, not a checklist imposed identically on every sale. Some statutory disclosures are due before contract signing, not merely before closing.
- Separate a condition from a promise. A condition can affect formation or a later duty to perform. Determine what the language does, when it must occur and what notice, waiver or extension is required. A condition failing does not automatically establish a breach, and a pending condition does not automatically mean no contract exists.
- Keep the ownership questions distinct. A valid, enforceable sale contract can support equitable conversion. It is not itself delivery of legal title, immediate possession or guaranteed priority against every third party. Read the conveyance, record and notice facts separately.
- For casualty risk, read the contract before applying the statutory default. Section 1 of the Illinois risk Act distinguishes neither title nor possession transferred from either one transferred. The relevant fault condition differs between the two branches. An escrow proviso can matter even after a deed is delivered and recorded.
- Do not label every delay a cancellation right. Identify the duty, deadline, required notice, opportunity to cure and contract remedy. Preserve the facts and get a disputed default or remedy interpreted by qualified counsel; the word executory does not supply an automatic refund, forfeiture or right to cancel.
- At closing, identify completed and surviving performance. Required funds, an operative conveyance and agreed possession can finish the central exchange. A material surviving promise can remain unperformed. Describe what is complete rather than assume that a closing appointment erased every obligation.
| Question | Evidence to examine | What the label does not prove |
|---|---|---|
| Was the agreement signed? | Actual signatures and authority | All performance is complete |
| Is there a binding agreement? | Assent, terms, authority and applicable formalities | A signature alone resolves every defect |
| Is performance still due? | Remaining buyer and seller promises | A right to cancel at will |
| Has a condition occurred? | The exact condition, deadline and notice terms | Every failed condition is a breach |
| Has legal title passed? | The operative conveyance and delivery facts | Acceptance alone transferred title |
| Who bears statutory casualty risk? | Contract allocation, title, possession, fault and escrow | Recording alone always decides the result |
| Is an equitable interest protected against a creditor? | The interest, record and notice facts | Equitable conversion defeats all liens |
| What remains after closing? | Survival terms and collateral obligations | Every duty ended with the appointment |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Executed as signed and executed as performed | The first describes document signing. The second describes completion of performance. A fully signed purchase contract can still be executory. | Which meaning does the question use? |
| Executory and invalid | Executory concerns unfinished performance under an agreement. Formation, enforceability or validity is a different inquiry. | The example must establish a contract before labeling its stage. |
| Executory and bilateral | Executory describes performance status. Bilateral describes an exchange of promises. The labels can apply to the same contract. | Unfinished duties and the promise structure are separate. |
| Condition to formation and condition to performance | One affects whether an agreement becomes binding; the other can govern a duty within an existing agreement. The language and facts control. | No agreement yet, or an agreement with a conditional duty? |
| Equitable title and legal title | Equitable conversion can recognize the buyer's interest under an enforceable sale contract. That does not itself deliver the seller's legal title. | A contract right is not the same event as conveyance. |
| Possession and title | The buyer can receive possession before receiving legal title. Under the Illinois risk Act, either event can matter to the default allocation. | Who occupies, and what has legally transferred? |
| A failed condition and a breach | A condition may fail without anyone breaking a promise. Failure to make a promised effort or give required notice raises a different question. | Read the duty and procedure, not just the result. |
| Recording and completed escrow | A recorded deed does not alone prove satisfaction of the escrow conditions governing the passage of full legal and equitable title for the risk Act. | Apply the Act's escrow proviso in its own context. |
| Core closing performance and every promise | Completing price and conveyance duties does not necessarily perform a surviving repair or other collateral obligation. | Name the remaining promise. |
| An ordinary pending sale and an installment land contract | Both can have future performance due. A specialized installment arrangement is not the definition of every executory purchase agreement. | Do not import an installment statute into every pending closing. |
Work through the facts
Signed, binding and still unfinished
The parties have a valid, enforceable purchase agreement. The buyer still owes the balance of the price, and the seller still owes the required conveyance.
- Document signing and performance are separate events.
- Both parties have remaining obligations.
Answer: The contract is executory even though the document has been signed.
A financing condition remains pending
A binding agreement makes a later closing duty subject to a financing condition and specifies efforts and written notice. The condition is still pending within its stated period.
- The example establishes an existing agreement.
- The condition governs later performance; the actual effort, notice and deadline terms still matter.
Answer: Do not treat the pending condition as proof that no contract exists or as an unlimited exit right.
The buyer has no deed yet
A valid, enforceable Illinois sale contract exists, but the required conveyance has not occurred. The buyer calls the contract an already delivered deed.
- Equitable conversion can recognize an equitable interest under an enforceable contract.
- It is not the conveyance of the seller's legal title.
Answer: Distinguish the contractual equitable interest from the remaining legal-title transfer.
Material damage before title or possession
Neither legal title nor possession has transferred. A material part of the property is destroyed without purchaser fault, and the contract does not expressly change the risk Act's default.
- Section 1(a) fits the stated transfer and destruction facts.
- It prevents vendor enforcement and entitles the purchaser to recover price already paid.
Answer: Apply Section 1(a), while handling an actual escrow payout through the required process.
Early possession changes the branch
The purchaser has taken possession, but legal title has not transferred. Part of the property is destroyed without vendor fault, and no express contract term changes the statutory default.
- Section 1(b) applies when either title or possession has transferred.
- It covers all or any part destroyed without vendor fault.
Answer: That destruction does not itself relieve the purchaser of the price duty or entitle recovery of price paid.
A late step is not automatically a termination right
A party delivers a promised administrative copy late. The other party immediately declares the entire purchase canceled without reviewing the contract.
- Identify the particular promise, deadline, consequences and any cure or notice terms.
- The executory label does not establish material breach or a contractual cancellation right.
Answer: Read the terms and the significance of the delay before asserting a remedy.
A repair promise survives the closing
The required funds, accepted deed and agreed possession have been delivered. A separate written repair promise expressly survives, and the promised work remains undone.
- The central price and conveyance exchange is complete.
- The surviving promise still needs to be performed or otherwise resolved.
Answer: Do not describe every obligation as completed merely because closing occurred.
One party has performed, the other has not
Under an otherwise valid agreement, one party has completed its required performance, while the other still owes a material promised act.
- Ordinary executory vocabulary can describe performance remaining from one or both parties.
- It does not require every party to be equally unfinished.
Answer: Identify the remaining duty; the contract is not fully performed on these facts.
The deed is recorded but escrow is incomplete
A sale is to be consummated through escrow. A deed has been delivered and recorded, but the escrow conditions for passing full legal and equitable title are unfulfilled. The purchaser has not received possession.
- Section 1(b) expressly addresses this escrow situation.
- For this Act, deed delivery and recordation do not alone establish transferred title before those escrow conditions are fulfilled.
Answer: Do not choose the transferred-title branch solely from the recorded deed; examine the remaining statutory facts.
An equitable interest is not automatic lien priority
A buyer relies on an unrecorded purchase contract to argue that a judgment creditor without notice can have no claim against the seller's land.
- United Community Bank recognizes that equitable conversion exists.
- Its published analysis rejects treating the unrecorded contract as automatically effective against the judgment creditor without notice.
Answer: Review recording and notice rather than assume equitable conversion defeats the creditor.
Mistakes to avoid
- Executory means unsigned. It describes performance remaining, not an empty signature block.
- Any signed form proves a binding contract. Formation, authority and enforceability still need their own analysis.
- The buyer paid earnest money, so the sale is fully performed. A deposit does not itself finish the price, conveyance and other agreed duties.
- Every contingency means there is no contract. Determine whether it affects formation or later performance.
- The buyer has equitable title, so legal title and all lien issues are settled. Conveyance, recording and third-party notice remain separate.
- Before deed transfer, casualty risk can never change. Possession and the contract can affect the statutory result.
- The same fault condition governs both statutory branches. Section 1(a) uses purchaser fault; Section 1(b) uses vendor fault.
- Closing completes every promise. Check surviving and collateral obligations instead of relying on the closing label.
Check your understanding
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. A valid purchase contract is signed, but the buyer still owes purchase funds and the seller still owes the conveyance. What best describes it?
- Executory because promised performance remains
- Unilateral solely because both parties signed
- Automatically void because closing is later
- Fully performed solely because it is signed
Show answer and explanation
Answer: A. Executory because promised performance remains
Executory describes performance status. Signing the document can be called execution in a different sense, but it does not complete the stated funds and conveyance duties.
2. A binding contract makes a later duty subject to a financing condition. While that condition is properly pending, what follows?
- The buyer can ignore promised financing efforts
- An agreement can exist while a later performance duty remains conditional
- No agreement can exist under any circumstances
- The condition has no deadline even if the contract supplies one
Show answer and explanation
Answer: B. An agreement can exist while a later performance duty remains conditional
A condition affecting later performance need not prevent contract formation. Its exact terms, deadlines, efforts and notice requirements still control.
3. A buyer argues that an enforceable sale contract itself delivered the seller's legal title. Which distinction is missing?
- Equitable conversion and the legal-title conveyance
- The seller's moving plans and the inspection appointment
- Physical possession and the listing price
- The broker's fee and the lender's rate
Show answer and explanation
Answer: A. Equitable conversion and the legal-title conveyance
An enforceable sale contract can support equitable conversion, but it is not itself the required conveyance of legal title. The remaining title, possession and record questions must be examined separately.
4. Neither title nor possession has transferred. A material part is destroyed without purchaser fault, and the contract does not expressly alter the statutory default. What follows under 765 ILCS 65/1(a)?
- The purchaser must always pay regardless of the statute
- The deed transfers upon the casualty
- The vendor cannot enforce, and the purchaser is entitled to recover price paid
- The seller automatically takes the buyer's deposit as damages
Show answer and explanation
Answer: C. The vendor cannot enforce, and the purchaser is entitled to recover price paid
These facts fit Section 1(a). The statutory entitlement does not itself identify or replace the separate procedure an actual escrow holder must follow to disburse disputed funds.
5. Possession has transferred to the purchaser. Part of the property is later destroyed without vendor fault, with no express contract change to the statutory default. Which rule applies?
- The destruction does not itself relieve the purchaser of the price duty under Section 1(b)
- Section 1(a) necessarily applies because no deed was delivered
- The purchaser receives an automatic price refund
- Only purchaser fault matters under Section 1(b)
Show answer and explanation
Answer: A. The destruction does not itself relieve the purchaser of the price duty under Section 1(b)
Section 1(b) applies when either legal title or possession has transferred and uses destruction without vendor fault. Its coverage is all or any part; an early possession transfer can matter before a deed conveyance.
6. A sale is to be consummated through escrow. A deed is recorded, but the conditions for passing full legal and equitable title are unfulfilled. No possession has transferred. For the risk Act, which answer is best?
- The escrow conditions are legally irrelevant
- The purchaser necessarily holds possession because the deed was recorded
- Apply the escrow proviso rather than treat recording alone as transferred title
- Recording conclusively completes title transfer for every purpose
Show answer and explanation
Answer: C. Apply the escrow proviso rather than treat recording alone as transferred title
The proviso says title is not considered transferred for this Act, despite delivery and recordation, until those escrow conditions are fulfilled. This is a statutory-context conclusion, not a universal title ruling.
7. The parties complete their price and conveyance exchange, but an expressly surviving material repair promise remains unperformed. Which statement is most precise?
- The repair promise automatically disappeared
- Every duty necessarily merged into the deed
- Core closing performance is complete, but a surviving obligation remains
- The buyer never received a deed
Show answer and explanation
Answer: C. Core closing performance is complete, but a surviving obligation remains
Describe the actual performance. Closing can complete the central exchange while a surviving or collateral promise remains. Do not label every obligation performed merely because closing took place.
8. A buyer invokes equitable conversion under an unrecorded contract to defeat every possible judgment creditor without reviewing notice. Which response is best?
- Equitable conversion always defeats every lien
- Examine record and notice facts; equitable conversion alone does not establish priority
- Every creditor automatically has actual notice
- Unrecorded contracts can never create any rights between the parties
Show answer and explanation
Answer: B. Examine record and notice facts; equitable conversion alone does not establish priority
United Community Bank recognizes equitable conversion but rejects its asserted automatic effect against the judgment creditor without notice in that case. The doctrine is not a complete priority analysis.
9. One party has completed its obligations under a valid agreement, but the other still owes a material promised act. What is the best ordinary vocabulary answer?
- The contract is fully performed by definition
- Performance remains; executory does not require both parties to be unfinished
- The contract could never have been binding
- Every legal system must use the same bankruptcy test here
Show answer and explanation
Answer: B. Performance remains; executory does not require both parties to be unfinished
Ordinary executory vocabulary can concern performance due from one or both parties. Specialized statutory contexts can use different tests; this lesson does not decide bankruptcy treatment.
10. A learner lists a covered Illinois seller's initial disclosure report as something that can simply wait until closing. Which correction is accurate?
- Section 20 requires the covered report before contract signing, so not every task starts after acceptance
- A purchase contract eliminates all disclosure duties
- The executory label suspends statutory deadlines
- All disclosures are due only after the deed records
Show answer and explanation
Answer: A. Section 20 requires the covered report before contract signing, so not every task starts after acceptance
For a transaction covered by the Residential Real Property Disclosure Act, Section 20 places delivery before contract signing. Later supplementation is a distinct rule. The word executory does not move a statutory deadline.
Common questions
What is an executory contract in real estate?
It is a contract with performance still due from one or both parties. A binding purchase agreement commonly remains executory while price, conveyance or other material promises are outstanding. First establish the agreement and then identify what remains. The label does not itself decide validity, title, a breach or a remedy.
Can a signed contract still be executory?
Yes. Executed can describe signing a document, while executory describes uncompleted performance. A valid, fully signed purchase contract can still require funding, title work, delivery and possession. Read which meaning the question uses instead of deciding from the signature block alone.
Is an executory agreement the same as a bilateral contract?
No. Bilateral describes an exchange of promises. Executory describes whether performance remains. A purchase agreement can be bilateral and executory at the same time. The performance label does not replace formation or enforceability analysis.
Do both parties need unfinished obligations?
Not for the ordinary vocabulary used here. Performance can remain from one or both parties. Specialized statutory contexts, including bankruptcy, can raise a different definition or test. Do not use this short glossary entry to decide whether a particular agreement can be assumed or rejected in bankruptcy.
Does a contingency mean there is no contract?
Not necessarily. A condition can concern formation or a later performance obligation. Carollo distinguishes those questions and stresses the actual language and facts. A financing or inspection condition in a binding agreement is not automatically proof that no contract formed; its deadlines and procedures still matter.
Does signing give the buyer legal title?
The purchase contract and the conveyance are different events. An enforceable Illinois sale contract can support an equitable interest, while the legal-title transfer still requires the agreed operative conveyance. Possession may also occur at a different time. Do not treat equitable conversion as a delivered deed.
Does equitable conversion defeat every lien?
No. In United Community Bank, the court recognized the doctrine but rejected its asserted automatic effect against the judgment creditor without notice of the unrecorded contract. Record and notice facts matter. This lesson does not calculate priority for an actual title file or promise that a buyer's equitable interest defeats every creditor.
Who bears casualty risk before closing in Illinois?
Read any express contract allocation first. The Uniform Vendor and Purchaser Risk Act otherwise distinguishes neither legal title nor possession transferred from either one transferred. For destruction, Section 1(a) uses purchaser fault and Section 1(b) uses vendor fault. The exact extent of destruction and the escrow proviso also matter; before closing alone is not a complete answer.
What happens before either title or possession transfers?
Under Section 1(a), absent an express contract change, destruction of all or a material part without purchaser fault, or a taking of all or a material part by eminent domain, prevents the vendor from enforcing and entitles the purchaser to recover price paid. Apply all the conditions; a trivial defect is not automatically a material destruction. Actual fund disbursement can require a separate escrow process.
What if the buyer already has possession?
Section 1(b) uses either transferred legal title or transferred possession. Absent an express contract change, destruction of all or any part without vendor fault, or the specified eminent-domain taking, does not itself relieve the purchaser of the price duty or entitle recovery of price paid. Check the possession, title and contract facts rather than assume the closing date controls.
Can a recorded deed still leave the risk Act's escrow conditions open?
Yes. For a sale to be consummated through escrow, the Act says title is not considered transferred for its purposes despite deed delivery and recordation until the conditions concerning passage of full legal and equitable title have been fulfilled. Do not expand that proviso into a universal ruling about every title or recording issue.
Is every failed condition or missed deadline a breach?
No. A condition can fail without a broken promise. A missed promised act raises questions about the actual obligation, notice, cure, materiality and available remedy. A cancellation right may also come from the contract. The executory label does not answer these questions or entitle either party to a deposit automatically.
Does closing make every provision fully performed?
No. Completing the central price and conveyance exchange does not necessarily complete a surviving repair, warranty or collateral obligation. Illinois merger doctrine has qualifications, including collateral undertakings and recognized exceptions. Identify the particular remaining promise and its enforceability instead of saying everything ended at closing.
Is an installment land contract the only executory sale contract?
No. A purchase agreement awaiting an ordinary closing can also be executory. An installment arrangement with retained seller interest can involve distinct statutory and contractual questions. Do not apply a specialized installment deadline, disclosure or remedy to every pending purchase merely because performance remains.
Can every disclosure wait until closing?
No. For covered Illinois residential transactions, Section 20 of the Residential Real Property Disclosure Act requires delivery of the initial report before contract signing. A later written supplement under Section 30 addresses later-discovered errors, inaccuracies or omissions before closing. Neither rule is postponed merely because a contract is executory.
How should I answer an executory-contract exam question?
Separate formation, document signing, remaining performance, legal title, possession and the requested consequence. Then use any stated condition, risk allocation or survival provision. Explain why the closest wrong choice confuses two events. These original questions help practice that method but do not validate an actual exam passing probability.
Keep practising
Your next practice step
Put contracts into practice
Check formation, status and the parties' obligations before choosing a remedy.
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Official sources and scope
Checked October 25, 2026 against the identified Illinois statutes, published opinions and PSI booklet dated June 24, 2026. The California glossary supplies ordinary vocabulary only. Read the stated conditions carefully: a decision about one contract does not establish a universal title, lien-priority, risk or cancellation rule.
- PSI June 24, 2026 outline: contract execution, rights and obligations
- California DRE glossary: executed and executory terminology
- Illinois Courts: Carollo v. Irwin, 2011 IL App (1st) 102765
- United Community Bank v.Prairie State Bank & Trust,2012ILApp(4th)110973
- Illinois Supreme Court: Czarobski v. Lata, 227 Ill. 2d 364 (2008)
- Published Illinois decision: In re Estate of Shedrick, 122 Ill. App. 3d 861 (1984)
- 765 ILCS 5/30: recording, creditors and purchasers without notice
- 765 ILCS 65/1: casualty risk and the escrow proviso
- 740 ILCS 80/2: land-contract writing and signature requirements
- 765 ILCS 77/20 and /30: initial report and later supplementation
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.