- Official section
- National V.A.2: Elements necessary for a valid contract
- Broker weight
- 19% of the national broker portion
- Expected scored items
- Contracts account for about 17 of 100 items
Illinois exam glossary
Valid contract
A contract question is easier when you stop asking only whether paper was signed. First find offer, matching acceptance, and consideration. Then screen assent, capacity, lawful purpose, definite terms, authority, and required form. Finally classify the consequence correctly as valid, void, voidable, or unenforceable.
Last updated: August 1, 2026
What does this exam area cover?
Short answer: A valid real estate contract rests on a definite offer, matching acceptance, and consideration, with genuine assent by parties who have legal capacity, a lawful objective, and terms certain enough to understand and enforce. The signer must have authority. Illinois land-sale agreements also require a writing or memorandum signed by the party to be charged under the Frauds Act, subject to legal exceptions. A missing enforceability formality does not always mean the agreement is void, so identify the defect before choosing the label.
This guide follows the PSI Illinois Candidate Information Booklet effective June 24, 2026, current Illinois contract decisions, 740 ILCS 80/1 through 3, 5 ILCS 175/5-120, and the Illinois Real Estate License Act, all checked through August 1, 2026. Common-law doctrines, consumer statutes, brokerage-form requirements, estates, trusts, entity authority, guardianship, electronic records, equitable exceptions, and the facts of performance can change a live result.
What is on the official outline?
- Topic
- Identify the parties
- What to know
- buyer, seller, legal names, entity, trustee, executor, agent, principal, capacity, authority, signature block, and vesting
- Best exam move
- Confirm who is making each promise and whether the signer can bind that person or entity.
- Topic
- Find a definite offer
- What to know
- proposal, offeror, offeree, property, price, terms, intent to be bound, communication, expiry, revocation, rejection, and termination
- Best exam move
- An offer gives the offeree a present power to accept a sufficiently definite bargain.
- Topic
- Test acceptance
- What to know
- unqualified assent, mirror image, signature, delivery, communication, deadline, method, knowledge, silence, performance, and objective conduct
- Best exam move
- Acceptance must match the offer and occur while the power of acceptance remains alive.
- Topic
- Spot a counteroffer
- What to know
- changed price, new closing date, altered contingency, strikeout, initial, conditional acceptance, rejection, new offer, original offer, and later assent
- Best exam move
- A material change ordinarily rejects the original and proposes a new bargain.
- Topic
- Require communication
- What to know
- delivery, notice, email, platform, agent, receipt, mailbox rule, specified method, time zone, proof, and revocation
- Best exam move
- A private decision to accept is not enough when the required acceptance has not been communicated.
- Topic
- Find consideration
- What to know
- bargained-for exchange, promise, performance, benefit, detriment, forbearance, sale promise, purchase promise, earnest money, adequacy, and past act
- Best exam move
- The exchanged promises can supply consideration even when no earnest-money check accompanies the contract.
- Topic
- Confirm mutual assent
- What to know
- meeting of minds, objective manifestation, same bargain, words, conduct, mistake, misunderstanding, secret intent, and material term
- Best exam move
- Judge agreement from outward manifestations rather than an unexpressed mental reservation.
- Topic
- Screen genuine consent
- What to know
- fraud, material misrepresentation, duress, undue influence, mistake, nondisclosure, reliance, coercion, rescission, and ratification
- Best exam move
- A signature obtained through a consent defect can make the agreement voidable rather than automatically void.
- Topic
- Check capacity
- What to know
- age, minor, mental competence, guardianship, intoxication, understanding, protected party, disaffirmance, ratification, and necessities
- Best exam move
- Classify the capacity issue and identify who holds any avoidance right.
- Topic
- Require lawful purpose
- What to know
- illegal object, public policy, zoning, licensing, discrimination, fraud, criminal conduct, prohibited payment, severability, and void agreement
- Best exam move
- Courts do not enforce a bargain whose essential object violates law or public policy.
- Topic
- Make terms definite
- What to know
- parties, property, legal description, street address, price, financing, closing, possession, fixtures, proration, and workable standard
- Best exam move
- The bargain must be certain enough to identify performance and fashion a remedy.
- Topic
- Distinguish material and minor terms
- What to know
- essential obligation, open term, custom, implication, statutory gap filler, ambiguity, interpretation, drafting, and remedy
- Best exam move
- A missing essential term threatens enforceability more than an incidental detail supplied by law or the agreement's method.
- Topic
- Apply the Frauds Act
- What to know
- 740 ILCS 80/2, sale of land, interest, more than one year, writing, memorandum, signature, party charged, authorized agent, and exception
- Best exam move
- For the exam, a land-sale contract should be evidenced by the required signed writing.
- Topic
- Identify the party charged
- What to know
- defendant, enforcement, signature, memorandum, authorization in writing, seller, buyer, agent, and evidentiary record
- Best exam move
- The statutory text focuses on the signature of the party against whom enforcement is sought.
- Topic
- Recognize electronic signatures
- What to know
- 5 ILCS 175/5-120, electronic symbol, intent, attribution, security procedure, platform, audit trail, consent, record, and exception
- Best exam move
- Electronic form can satisfy a signature rule, but authenticity and statutory scope still must be proved.
- Topic
- Verify agent authority
- What to know
- actual authority, apparent authority, power of attorney, entity resolution, trust instrument, executor, court approval, signature, and ratification
- Best exam move
- A perfectly drafted contract does not bind a principal when the signer lacks the authority needed for that act.
- Topic
- Read contingencies correctly
- What to know
- financing, inspection, attorney review, appraisal, sale of property, condition precedent, notice, waiver, deadline, satisfaction, and termination
- Best exam move
- A valid contract can be binding while performance remains conditional on a stated contingency.
- Topic
- Track amendments
- What to know
- addendum, amendment, counteroffer, written change, initials, signature, consideration, deadline, integration, and latest controlling text
- Best exam move
- Read the original and every accepted change as one transaction record.
- Topic
- Classify the defect
- What to know
- valid, void, voidable, unenforceable, illegal, lack of capacity, consent defect, missing writing, indefinite terms, and remedy
- Best exam move
- Name the legal consequence only after locating the particular formation, validity, or enforcement problem.
- Topic
- Protect brokerage practice
- What to know
- approved form, blank, explanation, unauthorized practice of law, attorney review, deadline, delivery, record retention, disclosure, and referral
- Best exam move
- A broker completes permitted forms and manages the transaction but does not draft novel legal clauses or adjudicate validity.
Which distinctions produce the most mistakes?
- Terms
- Offer vs. invitation to negotiate
- Difference
- An offer manifests willingness to be bound upon acceptance. An invitation seeks proposals without yet giving another person the power to conclude the deal.
- Question cue
- Present commitment versus request for offers.
- Terms
- Acceptance vs. counteroffer
- Difference
- Acceptance agrees to the offer as made. A counteroffer changes a material term and proposes a new contract.
- Question cue
- Match versus modify.
- Terms
- Consideration vs. earnest money
- Difference
- Consideration is the bargained-for exchange supporting the contract. Earnest money is a deposit and is not the only possible exchange.
- Question cue
- Legal exchange versus transaction deposit.
- Terms
- Mutual assent vs. signatures
- Difference
- Mutual assent is objective agreement to the same terms. Signatures are evidence and may satisfy a formality, but a signature procured without real assent raises a separate issue.
- Question cue
- Agreement versus evidence of agreement.
- Terms
- Capacity vs. authority
- Difference
- Capacity concerns a person's legal ability to contract. Authority concerns an agent's power to bind someone else.
- Question cue
- Ability for oneself versus power for another.
- Terms
- Valid vs. enforceable
- Difference
- Valid describes formation without a fatal defect. Enforceable means a court can grant a remedy despite formalities and defenses.
- Question cue
- Agreement formed versus remedy available.
- Terms
- Void vs. voidable
- Difference
- A void agreement has no legal effect from inception. A voidable contract operates unless the protected party elects to avoid it.
- Question cue
- No contract versus protected choice.
- Terms
- Voidable vs. unenforceable
- Difference
- Voidable focuses on one party's avoidance power. Unenforceable focuses on a legal bar to judicial remedy, such as a missing required writing.
- Question cue
- Election to avoid versus remedy barred.
- Terms
- Executed vs. executory
- Difference
- An executed contract has been fully performed. An executory contract still has material performance due.
- Question cue
- Finished versus duties remaining.
- Terms
- Bilateral vs. unilateral
- Difference
- A bilateral contract exchanges promises. A unilateral contract seeks performance in exchange for a promise.
- Question cue
- Promise for promise versus promise for act.
- Terms
- Contingency vs. invalidity
- Difference
- A contingency makes performance dependent on a stated event. It does not necessarily mean the contract failed to form.
- Question cue
- Conditional duty versus missing agreement.
- Terms
- Contract validity vs. breach
- Difference
- Validity asks whether the agreement has legal force. Breach asks whether a party failed to perform an existing duty.
- Question cue
- Contract existence versus nonperformance.
The C-O-N-T-R-A-C-T check
- Confirm the parties: establish legal identity, capacity, ownership, entity or fiduciary status, and the signer's authority.
- Observe offer and acceptance: match every material term, deadline, signature, delivery method, counteroffer, revocation, and communication.
- Name the consideration: identify the bargained-for promises, performance, benefit, detriment, or forbearance rather than relying only on earnest money.
- Test real assent and lawful purpose: screen mistake, fraud, duress, undue influence, misrepresentation, discrimination, illegality, and public policy.
- Require definite terms and form: identify the property and material obligations, then apply the Frauds Act and electronic-signature rules.
- Assign the correct classification: valid, void, voidable, or unenforceable, followed by breach, excuse, termination, or remedy analysis.
- Control the transaction record: reconcile the original, counters, addenda, amendments, notices, waivers, and delivery evidence.
- Transfer legal disputes: preserve deadlines and send contested validity, authority, capacity, drafting, and remedy issues to Illinois counsel.
- Element
- Offer
- Question to ask
- Was a definite bargain proposed?
- Typical defect
- Invitation or expired offer
- Element
- Acceptance
- Question to ask
- Did assent match and arrive on time?
- Typical defect
- Counteroffer or late response
- Element
- Consideration
- Question to ask
- What was bargained for?
- Typical defect
- Gift promise or illusory promise
- Element
- Assent
- Question to ask
- Did both objectively agree?
- Typical defect
- Fraud, duress, or material mistake
- Element
- Capacity and authority
- Question to ask
- Could the signer bind the party?
- Typical defect
- Minor, incapacity, or unauthorized agent
- Element
- Legality and form
- Question to ask
- Is the purpose lawful and required writing present?
- Typical defect
- Illegal object or Statute of Frauds defense
How do the rules work in scenarios?
Promises supply consideration
Scenario: A buyer and seller sign an Illinois land-sale contract. The earnest-money paragraph says the deposit is due in three days, but the check has not yet been delivered.
- The seller promised to convey and the buyer promised to purchase and pay.
- Those exchanged promises can provide consideration.
- Failure to deliver the deposit is analyzed under the deposit clause and remedies, not assumed to erase formation automatically.
Answer: Do not declare the contract invalid solely because earnest money was not handed over at signing.
Changed closing date
Scenario: A seller signs a buyer's offer but changes closing from October 1 to October 15 before returning it.
- The seller did not assent to the offer exactly as presented.
- Changing a material performance date creates a counteroffer.
- No contract on the changed terms forms until the buyer accepts while that counteroffer remains open.
Answer: The seller made a counteroffer, not an unqualified acceptance.
Secret intent
Scenario: A buyer signs and delivers an offer but privately tells a friend that the buyer does not feel committed.
- Contract assent is judged from objective manifestations.
- The private reservation was not communicated to the seller.
- Other formation and validity elements still must be present.
Answer: The uncommunicated mental reservation does not by itself defeat objective assent.
Unsigned land-sale text
Scenario: The parties discuss a property and price by phone, but the person against whom enforcement is sought signs no contract or memorandum.
- The bargain concerns sale of land.
- Section 2 of the Illinois Frauds Act requires the relevant signed writing for an enforcement action.
- Possible exceptions are legal issues and are not supplied by the facts.
Answer: The agreement faces a Statute of Frauds enforcement defense; do not simply label it void.
Electronic signature
Scenario: The seller intentionally applies a verifiable electronic signature to the final contract through the agreed platform.
- Illinois law generally permits an electronic signature to satisfy a signature requirement.
- The final terms, signer attribution, intent, and complete audit record should still be verified.
- Electronic form does not eliminate other contract elements.
Answer: The electronic form can satisfy the signature requirement if the governing conditions are met.
Agent without authority
Scenario: A neighbor signs a purchase contract in the owner's name because the owner is traveling, but the owner gave no authority and refuses to ratify it.
- The neighbor is purporting to bind another person.
- The facts provide no actual authority and no later ratification.
- The required authority and any Statute of Frauds authorization must be examined.
Answer: Do not treat the neighbor's signature as automatically binding the owner.
Financing contingency
Scenario: A fully signed contract makes the buyer's duty to close conditional on timely mortgage approval and gives a notice procedure if approval fails.
- The parties can form a contract with conditional performance.
- The financing clause allocates a later risk and sets a deadline and procedure.
- The buyer must follow the clause rather than assume the contract never existed.
Answer: The contingency does not by itself prevent contract formation.
What are the common exam traps?
- Trap
- Using signature as the only element
- Correction
- A signature is evidence and can satisfy formality, but offer, acceptance, consideration, assent, capacity, legality, certainty, and authority still matter.
- Trap
- Requiring earnest money for every valid contract
- Correction
- Mutual promises to sell and buy can furnish consideration.
- Trap
- Calling any advertisement an offer
- Correction
- Many advertisements invite negotiations rather than manifest a present commitment to be bound.
- Trap
- Calling a changed response acceptance
- Correction
- A material change ordinarily makes the response a counteroffer.
- Trap
- Letting silence equal acceptance automatically
- Correction
- Acceptance ordinarily requires objective assent under the offer and circumstances; silence is not a universal rule.
- Trap
- Using a secret intention to defeat assent
- Correction
- Courts generally assess communicated words and conduct.
- Trap
- Assuming unequal values mean no consideration
- Correction
- Courts generally look for a bargained exchange, not exact economic equivalence, absent another defense.
- Trap
- Confusing capacity with authority
- Correction
- Capacity is ability to contract for oneself; authority is power to act for another.
- Trap
- Calling every minor's contract void
- Correction
- The usual exam classification is voidable for the protected party, subject to applicable rules.
- Trap
- Treating a contingency as invalidity
- Correction
- A valid agreement can make performance conditional on financing, inspection, or another stated event.
- Trap
- Calling an oral land-sale bargain automatically void
- Correction
- The precise issue is the Frauds Act enforcement requirement and any legally recognized exception.
- Trap
- Rejecting an electronic signature solely because it is electronic
- Correction
- Illinois law generally recognizes electronic signatures, while attribution and scope remain important.
- Trap
- Ignoring the party-to-be-charged language
- Correction
- The Illinois land-sale provision specifies a writing signed by the party against whom enforcement is sought or a lawfully authorized agent.
- Trap
- Assuming an agent can sign anything
- Correction
- Confirm the type, scope, form, and duration of authority and any required principal approval.
- Trap
- Letting a broker rule on validity
- Correction
- Document the issue, preserve deadlines, and refer contested legal consequences to counsel.
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. Which three requirements do Illinois decisions call the basics of a contract?
- Offer, acceptance, and consideration
- Deed, recording, and possession
- Appraisal, survey, and inspection
- License, commission, and closing
Show answer and explanation
Answer: Offer, acceptance, and consideration
Other validity and enforceability screens still apply to the particular transaction.
2. A seller changes the price before signing a buyer's offer. What is the response?
- A counteroffer
- An acceptance
- A deed
- A novation
Show answer and explanation
Answer: A counteroffer
The material change rejects the original offer and proposes new terms.
3. Must earnest money always be delivered for consideration to exist?
- No, exchanged promises can supply consideration
- Yes, in every contract
- Yes, but only in cash
- No, because consideration is never required
Show answer and explanation
Answer: No, exchanged promises can supply consideration
The deposit's contractual treatment remains a separate performance issue.
4. What does mutual assent examine?
- Objective agreement to the same bargain
- Only a party's secret intention
- Only the appraised value
- Only the closing date
Show answer and explanation
Answer: Objective agreement to the same bargain
Words and conduct reveal assent more reliably than uncommunicated thoughts.
5. What does the Illinois Frauds Act generally require for a land-sale enforcement action?
- A writing or memorandum signed by the party to be charged or authorized agent
- Only an oral statement to a broker
- A recorded deed before contracting
- A cash earnest-money payment
Show answer and explanation
Answer: A writing or memorandum signed by the party to be charged or authorized agent
Legal exceptions and equitable doctrines are outside a simple exam fact pattern unless stated.
6. What is the usual exam classification of a contract made by a party lacking protected capacity?
- Voidable by the protected party
- Always fully executed
- Automatically a deed
- Always a unilateral contract
Show answer and explanation
Answer: Voidable by the protected party
Specific capacity facts and later ratification can affect the result.
7. Can an electronic signature satisfy an Illinois signature rule?
- Generally yes, subject to statutory scope and proof
- Never
- Only if handwritten afterward
- Only for appraisals
Show answer and explanation
Answer: Generally yes, subject to statutory scope and proof
Intent, attribution, record integrity, consent, and any exclusions remain relevant.
8. What is a voidable contract?
- An agreement the protected party may elect to avoid
- An agreement with no possible legal effect from inception
- A fully performed contract
- A recorded deed
Show answer and explanation
Answer: An agreement the protected party may elect to avoid
Until avoided, it can have legal effect.
9. Does a financing contingency necessarily prevent contract formation?
- No, it can condition later performance
- Yes, always
- Yes, unless earnest money is doubled
- No, because contingencies have no effect
Show answer and explanation
Answer: No, it can condition later performance
The clause's deadlines, conditions, notice, and waiver terms control.
10. Who should determine a disputed live contract's legal validity?
- A qualified attorney or court based on the full facts
- The listing advertisement
- The appraiser
- A broker acting alone
Show answer and explanation
Answer: A qualified attorney or court based on the full facts
The broker can identify and communicate transaction issues without issuing a legal ruling.
How should you study this area?
- Session
- Session 1
- Focus
- Build the formation chain
- Proof you are ready
- Classify 40 invitations, offers, acceptances, counteroffers, expirations, revocations, rejections, and communications.
- Session
- Session 2
- Focus
- Find consideration and assent
- Proof you are ready
- Solve 30 promise, performance, earnest-money, illusory-promise, past-act, mistake, fraud, and duress scenarios.
- Session
- Session 3
- Focus
- Screen parties and purpose
- Proof you are ready
- Audit 30 capacity, minor, guardianship, entity, trust, power-of-attorney, agent-authority, legality, and public-policy facts.
- Session
- Session 4
- Focus
- Apply certainty and form
- Proof you are ready
- Review 30 property, price, closing, open-term, signed-writing, party-charged, electronic-signature, and attribution scenarios.
- Session
- Session 5
- Focus
- Classify consequences
- Proof you are ready
- Sort 35 valid, void, voidable, unenforceable, executory, executed, contingent, breached, rescinded, and terminated agreements.
- Session
- Session 6
- Focus
- Run C-O-N-T-R-A-C-T
- Proof you are ready
- Audit two Illinois purchase records, score at least 90 percent, and explain the precise defect behind each missed choice.
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 Valid Contract: Illinois Real Estate Exam Guide
What is a valid contract?
A valid contract is an agreement that satisfies the legal requirements for formation and is not defeated by a validity defect. Illinois courts commonly identify offer, acceptance, and consideration as the basic requirements. Real estate exam analysis also checks competent parties, mutual assent, lawful purpose, sufficiently definite terms, authority, and any writing or signature required for enforcement.
What are the essential elements of a valid real estate contract?
Start with a definite offer, unqualified acceptance communicated while the offer remains open, and bargained-for consideration. Then confirm genuine mutual assent, capacity, lawful purpose, reasonably certain material terms, and authority. For an Illinois contract for the sale of land, also apply the Frauds Act writing and signature requirement before calling the agreement enforceable.
Does a contract need earnest money to be valid?
No. Earnest money can evidence seriousness and provide a remedy fund, but it is not the only possible consideration. The parties' exchanged promises to sell and buy can supply consideration. A stated deposit that is late, waived, disputed, or never delivered must be analyzed under the contract; it does not automatically prove that no agreement formed.
Must an Illinois real estate sales contract be in writing?
To bring an action charging a person on a contract for the sale of land or an interest in it for longer than one year, 740 ILCS 80/2 requires a writing or memorandum signed by the party to be charged or that party's lawfully authorized agent. Exceptions and equitable doctrines are legal issues. For exam purposes, use a signed writing for a land-sale contract.
Can an electronic signature satisfy the signature requirement?
Often yes. Section 5-120 of the Illinois Electronic Commerce Security Act states that an electronic signature satisfies a rule of law requiring a signature, subject to the statute's limits and proof requirements. Consent, attribution, record integrity, platform evidence, and any excluded document still matter. Electronic does not mean unsigned or automatically authentic.
What makes contract terms sufficiently definite?
The material obligations must be reasonably certain enough for a court to determine what the parties agreed and provide a remedy. In a real estate sale, the parties, property, price or workable pricing method, and essential performance terms deserve close attention. A blank or unresolved material term can prevent enforcement, while a minor omission may be supplied by law or interpretation.
What is mutual assent?
Mutual assent is objective agreement to the same bargain. Courts look at outward words and conduct, not a secret intention one party never communicated. An offer and a matching acceptance usually express assent. A response that changes a material term is ordinarily a counteroffer, so it rejects rather than accepts the original offer unless the offeror later accepts the new terms.
What is a contract entered by a minor?
A contract entered by a person lacking full legal capacity is commonly classified as voidable for the protected party, not automatically void in every circumstance. The precise capacity rule, necessities, emancipation, misrepresentation, ratification after majority, and restoration duties require legal analysis. On an exam, distinguish lack of capacity from illegal purpose and from a missing essential agreement.
What is the difference between valid and enforceable?
Validity asks whether a legal agreement formed without a fatal defect. Enforceability asks whether a court will provide a remedy. A land-sale bargain may have genuine assent and consideration yet face a Statute of Frauds defense because the required signed writing is absent. That is why unenforceable should not be treated as a synonym for void.
Can a real estate broker decide whether a contract is valid?
A broker can identify missing signatures, inconsistent dates, blanks, counteroffers, deadlines, and transaction risks, then obtain direction. The broker should not issue a legal opinion on validity, capacity, fraud, duress, authority, Statute of Frauds exceptions, rescission, or remedies. Use approved forms within license scope and refer disputed legal questions to the parties' attorneys.
Are these official PSI questions or legal advice?
No. The practice questions are original. Illinois statutes, Illinois decisions, and the exam bulletin were checked through August 1, 2026. This is exam education, not legal advice or a ruling on any agreement. A live contract requires the complete signed record, amendments, communications, authority documents, facts, and current review by a qualified Illinois attorney.
Primary sources
- PSI Illinois Candidate Information Booklet effective June 24, 2026
- Illinois Supreme Court, Melena v. Anheuser-Busch, Inc., 219 Ill. 2d 135 (2006)
- Illinois Courts, official decision discussing offer, acceptance, consideration, and contract interpretation
- Illinois Courts, official decision discussing sufficiently definite and reasonably certain terms
- Illinois General Assembly, 740 ILCS 80/2 contracts for sale of land
- Illinois General Assembly, current Illinois Frauds Act sections 1 through 3
- Illinois General Assembly, 5 ILCS 175/5-120 electronic signatures
- Illinois General Assembly, current Real Estate License Act of 2000
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.