- Official section
- National V.A: General contract law and party obligations
- Broker weight
- 19% of the national broker portion
- Expected scored items
- Contracts account for about 17 of 100 items
Illinois exam glossary
Executory contract
A contract can be fully signed and still have most of its story left to tell. That is the executory stage. For exam purposes, put the transaction on a timeline: formation creates duties, contingencies control whether particular duties mature, performance moves the file toward closing, and deed delivery completes the legal-title transfer. The word executory describes where the parties are on that timeline.
Last updated: August 1, 2026
What does this exam area cover?
Short answer: An executory contract is a binding contract with material performance still due from one or both parties. After acceptance of a typical real estate purchase agreement, the buyer may owe earnest money, loan work, inspections, required notices, and purchase funds. The seller may owe disclosure delivery, access, title cure, property maintenance, deed execution, possession, and closing performance. A valid Illinois sale contract may support equitable conversion, but the seller retains legal title until the required conveyance. Executory does not mean unsigned, invalid, or optional.
This guide follows the PSI Illinois Candidate Information Booklet effective June 24, 2026, Illinois court authority on executory sale agreements, equitable conversion, conditions precedent, material breach, and deed transfer, 765 ILCS 65/1, 740 ILCS 80/2, and 765 ILCS 77/5, all checked through August 1, 2026. The parties' actual contract can alter timing, risk, remedies, escrow, possession, and survival. Bankruptcy, death, condemnation, insurance, tax, title priority, recording, installment contracts, land trusts, and equitable remedies require fact-specific legal review.
What is on the official outline?
- Topic
- Confirm formation first
- What to know
- offer, acceptance, mutual assent, consideration, lawful purpose, capacity, definite terms, writing, signature, delivery, and authority
- Best exam move
- Classify a contract as executory only after deciding that a binding agreement exists.
- Topic
- Place the file on a timeline
- What to know
- negotiation, offer, acceptance, effective date, contingency period, title review, financing, closing, deed, possession, and survival
- Best exam move
- Ask what has happened, what remains due, and what event matures the next duty.
- Topic
- Identify the buyer's remaining duties
- What to know
- earnest money, loan application, good-faith financing effort, inspection, notices, insurance, funds, documents, closing, and possession
- Best exam move
- A buyer under contract is not finished merely because the offer was accepted.
- Topic
- Identify the seller's remaining duties
- What to know
- disclosures, access, title evidence, lien payoff, cure, maintenance, casualty notice, deed, keys, possession, and closing
- Best exam move
- List each promised seller performance rather than jumping directly from acceptance to sale.
- Topic
- Read conditions precisely
- What to know
- formation condition, performance condition, condition precedent, financing, inspection, title, attorney review, appraisal, sale contingency, and deadline
- Best exam move
- Decide whether the language prevents contract formation or only postpones a duty to perform.
- Topic
- Track satisfaction and waiver
- What to know
- satisfied, unsatisfied, waived, expired, failed, prevented, extended, notice, good faith, election, and proof
- Best exam move
- A contingency does not operate forever; apply its deadline and required procedure.
- Topic
- Separate equitable and legal title
- What to know
- equitable conversion, equitable owner, vendor, vendee, legal title, purchase money, trust concept, deed, delivery, and recording
- Best exam move
- A valid contract may create equitable ownership, but it is not the deed transfer of legal title.
- Topic
- Preserve the property
- What to know
- maintenance, ordinary wear, damage, casualty, condemnation, repair, insurance, notice, risk allocation, possession, and walk-through
- Best exam move
- Read the contract first, then use the Illinois risk statute if the contract does not provide otherwise.
- Topic
- Apply statutory casualty risk
- What to know
- no transferred title, no transferred possession, material destruction, buyer fault, vendor enforcement, refund, title transfer, possession transfer, and escrow
- Best exam move
- Under 765 ILCS 65/1, possession can change the default statutory result even before an ordinary closing.
- Topic
- Control earnest money
- What to know
- deposit, escrow, trust funds, deadline, holder, receipt, contract credit, dispute, release, court, and accounting
- Best exam move
- Earnest money evidences the transaction but does not itself complete performance or transfer title.
- Topic
- Manage title performance
- What to know
- commitment, exceptions, objections, cure period, lien, survey, legal description, marketable title, deed, payoff, and closing
- Best exam move
- Determine what title the seller promised and whether objections and cure occurred on time.
- Topic
- Manage financing performance
- What to know
- application, preapproval, commitment, underwriting, appraisal, conditions, denial, notice, deadline, waiver, and cash to close
- Best exam move
- A financing contingency is not a casual exit; use its exact effort, proof, notice, and timing requirements.
- Topic
- Manage inspection performance
- What to know
- access, licensed inspector, report, objection, repair request, credit, cancellation, as-is, deadline, and final walk-through
- Best exam move
- Inspection rights follow the contract and do not automatically authorize every repair demand or late cancellation.
- Topic
- Audit closing readiness
- What to know
- identity, authority, title, loan clearance, funds, settlement figures, prorations, deed, affidavits, possession, and keys
- Best exam move
- Closing coordinates reciprocal performance; it is not just a ceremonial signature appointment.
- Topic
- Determine tender and performance
- What to know
- ready, willing, able, tender, concurrent conditions, escrow, delivery, funds, deed, prevention, and excuse
- Best exam move
- Before calling breach, ask whether the complaining party performed, tendered, or had a valid excuse.
- Topic
- Classify breach
- What to know
- minor breach, material breach, anticipatory repudiation, missed deadline, failed condition, default notice, cure, causation, and damages
- Best exam move
- Only a sufficiently serious breach or an agreed termination ground may justify ending the other party's performance.
- Topic
- Read termination rights
- What to know
- contingency cancellation, mutual release, default termination, rescission, expiry, notice, deadline, survival, restitution, and earnest money
- Best exam move
- Termination must rest on contract language, law, or mutual agreement, not simple regret.
- Topic
- Match remedies to the contract
- What to know
- damages, liquidated damages, earnest money, specific performance, rescission, restitution, injunction, mitigation, election, and attorney fees
- Best exam move
- Do not assume the same remedy belongs to buyer and seller or that every clause is enforceable.
- Topic
- Recognize completion and survival
- What to know
- purchase funds, deed delivery, legal title, possession, executed performance, merger, collateral promise, warranty, indemnity, and post-closing duty
- Best exam move
- Closing ends core executory duties, but clearly surviving or collateral obligations can remain.
- Topic
- Protect the broker's role
- What to know
- calendar, checklist, documentation, disclosure, prompt presentation, approved forms, no legal opinion, attorney, lender, title company, and escrowee
- Best exam move
- Track objective steps and refer disputed contract meaning, default, title, and remedies to qualified professionals.
Which distinctions produce the most mistakes?
- Terms
- Executed document vs. executed contract
- Difference
- An executed document can mean one that has been signed. An executed contract in the performance sense is one whose promised duties have been completed.
- Question cue
- Signed paper versus completed performance.
- Terms
- Executory vs. invalid
- Difference
- Executory means binding duties remain. Invalid means the supposed agreement lacks legal effect for a separate reason.
- Question cue
- Unfinished performance versus defective agreement.
- Terms
- Executory vs. unilateral
- Difference
- Executory describes performance status. Unilateral describes a formation structure in which acceptance occurs through requested performance.
- Question cue
- Timeline label versus promise structure.
- Terms
- Contract formation vs. contract performance
- Difference
- Formation asks whether a binding agreement arose. Performance asks whether each party completed the duties that agreement created.
- Question cue
- Did a deal form versus was the deal carried out.
- Terms
- Condition to formation vs. condition to performance
- Difference
- A formation condition prevents a contract from arising until it occurs. A performance condition can operate within an existing contract before a particular duty matures.
- Question cue
- No contract yet versus contract with duty waiting.
- Terms
- Equitable title vs. legal title
- Difference
- Equitable conversion can treat the buyer as equitable owner under a valid enforceable sale contract. Legal title ordinarily remains with the seller until conveyance by deed.
- Question cue
- Contract ownership interest versus deed ownership.
- Terms
- Acceptance vs. closing
- Difference
- Acceptance forms the purchase contract. Closing coordinates payment, title documents, deed delivery, possession, and other final performance.
- Question cue
- Agreement begins versus transaction performs.
- Terms
- Possession vs. title
- Difference
- Possession is physical control or occupancy. Title is the ownership interest, and possession can transfer earlier or later under the agreement.
- Question cue
- Who occupies versus who owns.
- Terms
- Contingency failure vs. breach
- Difference
- Failure of a condition may end or excuse a duty without wrongdoing. Breach is an unjustified failure to perform a contractual duty.
- Question cue
- Condition did not occur versus promise was broken.
- Terms
- Minor breach vs. material breach
- Difference
- A minor breach can support damages while performance continues. A material breach substantially defeats the bargain and can excuse further performance, subject to the facts and contract.
- Question cue
- Limited defect versus bargain-defeating failure.
- Terms
- Executory purchase contract vs. installment sales contract
- Difference
- An ordinary sale awaiting closing is executory, but a statutory installment sales contract involves installment consideration and retained seller interest under specialized Illinois rules.
- Question cue
- Broad performance status versus regulated financing form.
- Terms
- Deed delivery vs. recording
- Difference
- Delivery concerns whether the deed becomes operative between the parties. Recording gives public notice and affects priority; it is not the formation event for the purchase contract.
- Question cue
- Operative conveyance versus public notice.
The P-E-N-D-I-N-G check
- Parties and promises: verify identity, capacity, authority, formation, consideration, property, price, and every buyer and seller duty.
- Events and conditions: calendar the effective date, attorney review, inspection, financing, appraisal, title, sale contingency, extensions, and notices.
- Next performance: identify the exact act currently due, the responsible party, recipient, method, proof, and consequence of delay.
- Deed and ownership: separate equitable conversion from legal title, possession, deed delivery, escrow conditions, recording, and closing.
- Insurance and risk: read the contract, then test casualty, condemnation, transferred possession, transferred title, refunds, and repairs under Illinois law.
- Nonperformance and remedies: classify failed condition, waiver, prevention, minor breach, material breach, repudiation, cure, termination, and remedy language.
- Going to completion: confirm funds, title cure, prorations, documents, deed, possession, survival clauses, records, and professional referrals.
- Stage
- Negotiation
- What is true
- No final acceptance yet
- What remains
- Formation
- Stage
- Accepted contract
- What is true
- Binding deal may exist
- What remains
- Conditions and performance
- Stage
- Due diligence
- What is true
- Contract remains pending
- What remains
- Notices, waivers, approvals
- Stage
- Closing ready
- What is true
- Conditions addressed
- What remains
- Funds, deed, possession
- Stage
- Core performance
- What is true
- Price and conveyance exchanged
- What remains
- Surviving duties only
- Stage
- Default
- What is true
- A promised duty was missed
- What remains
- Cure, termination, or remedy
How do the rules work in scenarios?
Signed but still executory
Scenario: Buyer and seller sign a residential purchase contract on Monday. Inspection, financing, title review, purchase-fund delivery, deed delivery, and possession are scheduled for later dates.
- The signatures can establish an executed document and a binding agreement.
- Both parties still owe material performance.
- No deed or purchase funds have yet been exchanged.
Answer: The purchase contract is executory even though it is signed.
Financing condition within a contract
Scenario: An accepted contract gives the buyer 25 days to obtain financing and requires timely written notice of denial. The buyer applies promptly and the condition remains pending on day 10.
- Acceptance has already occurred.
- The financing language controls a later performance duty or termination right.
- The pending condition does not automatically make the entire agreement nonexistent.
Answer: A contract can be binding and executory while financing remains a condition.
Equitable interest, no legal title
Scenario: A valid enforceable sale contract exists, but closing is 30 days away and the seller has delivered no deed.
- Illinois equitable-conversion principles may treat the buyer as equitable owner.
- The seller continues to hold legal title pending conveyance.
- The contract is not equivalent to an completed legal-title sale.
Answer: The buyer may hold equitable title, while legal title remains with the seller.
Casualty before title or possession
Scenario: Neither legal title nor possession has transferred. Before closing, a faultless fire destroys a material part of the house, and the contract does not alter statutory risk.
- The Illinois risk statute supplies a default agreement unless the contract says otherwise.
- Neither title nor possession was transferred.
- Material destruction occurred without buyer fault.
Answer: Under 765 ILCS 65/1(a), the vendor cannot enforce and the purchaser may recover price already paid.
Early possession changes risk analysis
Scenario: The buyer takes possession under the contract before deed delivery. A later faultless casualty occurs, and the contract does not change the statutory allocation.
- Legal title has not transferred, but possession has.
- Section 1(b) applies when either legal title or possession has transferred.
- The buyer is not relieved from the price duty merely because of that casualty.
Answer: Transferred possession changes the Illinois statutory risk result.
Missed minor document deadline
Scenario: Seller delivers a noncritical association document one day late. Buyer has the full review period and suffers no loss, but immediately declares the entire purchase terminated without citing a contract right.
- Late delivery may be a breach or may extend a review right under the exact documents.
- Not every breach is material enough to end all performance.
- The contract, prejudice, cure, and negotiated remedies must be examined.
Answer: Do not assume every missed step automatically authorizes termination.
Closing completes core performance
Scenario: Buyer delivers the purchase funds, seller delivers the accepted deed and possession, and the escrow conditions are satisfied. A written repair warranty expressly survives for 60 days.
- The core price and conveyance duties have been performed.
- Legal title has moved through the deed transaction.
- The express repair promise remains alive after closing.
Answer: The sale is substantially executed, but the surviving warranty remains enforceable as written.
What are the common exam traps?
- Trap
- Calling executory an unsigned contract
- Correction
- Executory means performance remains, even when every required signature is present.
- Trap
- Calling every executory agreement invalid
- Correction
- A valid binding contract is commonly executory between acceptance and closing.
- Trap
- Skipping formation analysis
- Correction
- First prove a contract arose, then classify how much performance remains.
- Trap
- Treating a contingency as no contract
- Correction
- Determine whether it conditions formation or a later duty to perform.
- Trap
- Assuming a condition operates forever
- Correction
- Apply the deadline, notice, waiver, extension, and good-faith requirements.
- Trap
- Equating equitable conversion with a deed
- Correction
- Equitable ownership under a valid contract does not itself transfer legal title.
- Trap
- Calling acceptance an actual sale of legal title
- Correction
- Acceptance creates duties; deed conveyance completes the legal-title transfer.
- Trap
- Ignoring possession in casualty risk
- Correction
- Illinois statutory risk can change when either possession or legal title transfers.
- Trap
- Applying the risk statute before the contract
- Correction
- Section 1 supplies default terms unless the contract expressly provides otherwise.
- Trap
- Confusing earnest money with performance completion
- Correction
- A deposit is one contract step, not the deed, total price, or completed closing.
- Trap
- Calling failed condition a breach automatically
- Correction
- A condition can fail without a party violating a promised duty.
- Trap
- Calling every breach material
- Correction
- Assess the bargain, harm, cure, timing, good faith, and contract remedy.
- Trap
- Ignoring tender
- Correction
- A party seeking relief may need to show performance, readiness, tender, or excuse.
- Trap
- Assuming closing erases every promise
- Correction
- Collateral and expressly surviving duties can continue after deed delivery.
- Trap
- Letting the broker decide default
- Correction
- Document facts and deadlines, then obtain attorney direction on disputed rights and remedies.
Can you answer these original practice questions?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. What makes a contract executory?
- One or both parties still owe material performance
- The document lacks every signature
- The agreement is automatically void
- The deed has recorded
Show answer and explanation
Answer: One or both parties still owe material performance
Executory classifies the contract's performance status.
2. Can a fully signed purchase agreement be executory?
- Yes
- No
- Only if oral
- Only after recording
Show answer and explanation
Answer: Yes
Signing and completion of all promised performance are different events.
3. What does acceptance ordinarily create?
- A binding agreement subject to its terms
- An automatically recorded deed
- Immediate physical possession
- A property-tax exemption
Show answer and explanation
Answer: A binding agreement subject to its terms
Closing performance and legal-title conveyance ordinarily come later.
4. Who holds legal title before deed conveyance?
- The seller
- The lender always
- The broker
- The inspector
Show answer and explanation
Answer: The seller
A valid sale contract may give the buyer equitable ownership without transferring legal title.
5. Does every contingency prevent contract formation?
- No, many conditions govern later performance
- Yes, always
- Only financing contingencies do
- Only inspection contingencies do
Show answer and explanation
Answer: No, many conditions govern later performance
The wording and party intent determine the condition's function.
6. What controls casualty risk first?
- The parties' contract
- The listing photo
- The broker's preference
- The tax assessor
Show answer and explanation
Answer: The parties' contract
The Illinois risk statute applies unless the contract expressly provides otherwise.
7. Neither title nor possession transferred before material faultless destruction. What is the statutory default?
- Vendor cannot enforce and buyer may recover price paid
- Buyer must always close
- Broker receives the deposit
- Deed transfers automatically
Show answer and explanation
Answer: Vendor cannot enforce and buyer may recover price paid
That is the rule in 765 ILCS 65/1(a), absent a contrary contract term.
8. Is every failed condition a breach?
- No
- Yes
- Only before closing
- Only after acceptance
Show answer and explanation
Answer: No
A condition may fail without violation of a contractual promise.
9. What usually completes the core sale performance?
- Exchange of required funds and deed with agreed closing performance
- The first showing
- The listing agreement
- The appraisal order
Show answer and explanation
Answer: Exchange of required funds and deed with agreed closing performance
Some expressly surviving or collateral duties can remain afterward.
10. Who should resolve a disputed preclosing default?
- Qualified legal counsel
- The broker acting as judge
- The photographer
- The moving company
Show answer and explanation
Answer: Qualified legal counsel
The broker should preserve facts, notices, and records without giving a legal ruling.
How should you study this area?
- Session
- Session 1
- Focus
- Build the transaction timeline
- Proof you are ready
- Sort 35 negotiation, offer, acceptance, effective-date, contingency, closing, deed, possession, recording, and survival events.
- Session
- Session 2
- Focus
- Separate formation from performance
- Proof you are ready
- Classify 35 signature, mutual-assent, condition-to-formation, condition-to-performance, waiver, and failed-condition scenarios.
- Session
- Session 3
- Focus
- Track reciprocal duties
- Proof you are ready
- Audit 30 buyer and seller files for earnest money, access, inspection, financing, disclosure, title, funds, deed, and possession.
- Session
- Session 4
- Focus
- Master ownership and casualty
- Proof you are ready
- Solve 30 equitable-title, legal-title, early-possession, deed, escrow, casualty, condemnation, fault, and refund questions.
- Session
- Session 5
- Focus
- Classify nonperformance
- Proof you are ready
- Distinguish 35 failed condition, minor breach, material breach, repudiation, prevention, tender, cure, termination, and remedy facts.
- Session
- Session 6
- Focus
- Run P-E-N-D-I-N-G
- Proof you are ready
- Audit two Illinois purchase files from acceptance through closing, score at least 90 percent, and state every unfinished duty aloud.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
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Questions students ask about Executory Contract: Illinois Real Estate Exam Guide
What is an executory contract in real estate?
An executory contract is a binding agreement under which one or both parties still have material duties to perform. A typical purchase contract is executory after acceptance and before closing because the buyer may still need to deliver funds while the seller still needs to provide the required title and deed. The label describes performance status, not whether the contract was signed.
Is an executory contract the same as an unsigned contract?
No. In contract language, execute can mean sign, but executory describes work that remains. A purchase agreement can be fully signed, delivered, valid, and still executory. On an exam, look for unfinished contractual duties instead of deciding from the signature block alone.
When does a real estate purchase contract become executory?
It ordinarily enters the executory stage when offer and acceptance create a binding agreement and performance remains due. Exact formation depends on mutual assent, consideration, definite terms, required writing and signature, delivery rules, authority, and any condition governing formation. A contingency may postpone a duty to perform without necessarily postponing contract formation.
Who holds legal and equitable title while an Illinois sale contract is executory?
Under Illinois equitable-conversion authority, a valid and enforceable contract for the sale of realty can make the buyer the equitable owner while the seller continues to hold legal title for the buyer. The buyer is treated as holding the purchase money for the seller. This equitable status is not a deed and is not the same as an completed legal-title transfer.
Does signing a purchase contract transfer legal title in Illinois?
No. Illinois courts distinguish an executory agreement that can result in a sale from the actual transfer of legal title. The purchase contract creates enforceable rights and duties, and equitable conversion may apply, but legal title ordinarily passes through the conveyance required by the agreement, commonly delivery of a deed at closing.
Do contingencies make a contract nonbinding?
Not automatically. Illinois authority distinguishes a condition to formation from a condition affecting a party's later duty to perform. Financing, inspection, title, attorney-review, sale-of-property, or other negotiated language must be read exactly. A valid contract can exist while a performance condition remains unsatisfied, waived, fulfilled, or properly invoked.
Who bears casualty risk before an Illinois real estate closing?
The contract controls first. Unless the contract expressly provides otherwise, the Illinois Uniform Vendor and Purchaser Risk Act states that when neither legal title nor possession has transferred, destruction of all or a material part without buyer fault prevents the vendor from enforcing the contract and permits recovery of price already paid. If either legal title or possession has transferred, the statutory result changes.
When does an executory purchase contract become executed?
In the performance sense, it becomes executed when the material promised performances are completed, commonly when the buyer delivers the required funds and the seller delivers the deed and possession as agreed. Some collateral promises can survive closing. Do not assume every contract provision disappears merely because the deed was delivered.
What if a party defaults before closing?
First identify the duty, deadline, condition, notice-and-cure provision, materiality, and whether the complaining party performed or was excused. Then apply the contract's termination, earnest-money, damages, specific-performance, or other remedy language. Brokers preserve facts and notices, but disputed default and remedies require attorney direction.
Is an installment land contract executory?
It generally remains executory while installment payments and the seller's future conveyance duty remain, but it is not the only executory contract. Illinois installment sales contracts also have specific statutory definitions, disclosures, rescission rights, recording duties, and remedies. Do not apply those specialized rules to every ordinary contract awaiting a near-term closing.
Are these official PSI questions or legal advice?
No. The practice questions are original. The PSI Illinois outline, Illinois statutes, and Illinois court materials were checked through August 1, 2026. This guide is exam education, not legal, title, tax, insurance, escrow, or transaction advice. A live file requires review of the complete signed contract, addenda, notices, amendments, waivers, title evidence, payment records, deed, possession facts, and current law.
Primary sources
- PSI Illinois Candidate Information Booklet effective June 24, 2026
- Illinois Courts, official decision distinguishing an executory real estate agreement, equitable conversion, conditions precedent, and legal-title sale
- Illinois Courts, official decision explaining an executory land contract, equitable conversion, notice, and recording
- Illinois Courts, official real estate decision addressing conditions precedent, material breach, and failure to close
- Illinois General Assembly, 765 ILCS 65/1 Uniform Vendor and Purchaser Risk Act
- Illinois General Assembly, 740 ILCS 80/2 contracts for land and interests
- Illinois General Assembly, 765 ILCS 77/5 definition of residential real estate contract
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.