- Official section
- National V
- Broker weight
- 19%
- Expected scored items
- About 19 of 100 national items
National Section V study guide
Contracts for the Illinois broker exam
Contract questions reward sequence. Identify whether the facts describe negotiation, formation, performance, breach, or termination, then ask what changed and which party holds the next right or duty.
What does this exam area cover?
Short answer: Know general contract principles, formation and enforceability, offer and acceptance, contract classifications, options, notice and electronic execution, party rights, breach and remedies, ending a contract, purchase agreements, contingencies, leases, addenda and amendments, and multiple offers and counteroffers.
The PSI outline tests national contract concepts. Illinois law and the language of the actual agreement can change a real transaction's result. On the exam, use the facts and contract terms supplied; in practice, stay within the broker's authority and refer legal interpretation or drafting beyond approved practice to an attorney.
Practice the topic in Pass Illinois
From concept to decision
Drill this topic, then review the explanation
Pass Illinois gives you original national and Illinois questions, topic-by-topic study, clear explanations, timed practice, flashcards, progress tracking, and Math Coach. Start free, find the weak distinction, and focus the next session there.
What is on the official outline?
- Topic
- General contract principles
- What to know
- Agreement, promise, consideration, capacity, lawful purpose, express and implied terms, performance, and privity
- Best exam move
- Identify the parties, promises, subject, consideration, and stage before labeling the contract.
- Topic
- Elements of a valid contract
- What to know
- Competent parties, mutual assent, lawful objective, and consideration
- Best exam move
- Test each element separately and do not confuse consideration with earnest money.
- Topic
- Statute of Frauds
- What to know
- Writing and signature requirements for covered real estate agreements and the effect on enforceability
- Best exam move
- Ask whether the agreement concerns an interest in land and whether the applicable writing requirement is met.
- Topic
- Offer and contract
- What to know
- Offer, acceptance, rejection, revocation, expiration, counteroffer, communication, and formation
- Best exam move
- Track the latest live offer and determine whether acceptance matches it and was communicated as required.
- Topic
- Enforceability and status
- What to know
- Valid, void, voidable, unenforceable, executed, executory, express, and implied contracts
- Best exam move
- Separate formation quality from performance status and the availability of enforcement.
- Topic
- Bilateral and unilateral contracts
- What to know
- Promise exchanged for promise versus promise accepted through requested performance
- Best exam move
- Ask whether acceptance occurs through a return promise or completed performance.
- Topic
- Option agreements
- What to know
- Optionor, optionee, option period, consideration, exercise, expiration, and right without purchase obligation
- Best exam move
- Identify who must keep the offer open and who may choose whether to exercise.
- Topic
- Notice, delivery, acceptance, and execution
- What to know
- Effective communication, delivery method, receipt, signatures, copies, deadlines, and authority to sign
- Best exam move
- Use the agreement's stated method and deadline rather than assuming every notice works the same way.
- Topic
- Electronic signatures and paperless transactions
- What to know
- Consent, intent, attribution, integrity, retention, access, delivery records, security, and transaction-specific limits
- Best exam move
- Electronic form alone does not defeat validity, but technology does not cure missing consent, authority, or required terms.
- Topic
- Rights, duties, breach, and remedies
- What to know
- Performance, tender, default, material breach, damages, liquidated damages, specific performance, rescission, and mitigation
- Best exam move
- Match the remedy to the breach, contract language, injured party, and governing law.
- Topic
- Termination, rescission, and cancellation
- What to know
- Performance, mutual agreement, contingency, expiration, breach, impossibility, operation of law, rescission, and release
- Best exam move
- Identify whether duties were completed, discharged prospectively, or unwound.
- Topic
- Purchase and lease contracts
- What to know
- Addenda, amendments, purchase agreements, contingencies, leases, rental agreements, lease-purchase agreements, and lease types
- Best exam move
- Read the document's function, condition, dates, payment structure, and possession terms.
- Topic
- Multiple offers and counteroffers
- What to know
- Presentation, seller decisions, confidentiality, disclosure, offer ranking, counteroffers, backup offers, and documentation
- Best exam move
- Keep each offer chain separate and never assume price is the seller's only concern.
Which distinctions produce the most mistakes?
- Terms
- Offer vs. contract
- Difference
- An offer proposes definite terms and invites acceptance. A contract exists only after formation requirements are met.
- Question cue
- Still revocable or awaiting acceptance versus binding mutual obligations.
- Terms
- Valid vs. enforceable
- Difference
- Validity concerns formation elements. Enforceability asks whether a court will provide a remedy despite any legal defense.
- Question cue
- Missing element versus failure to satisfy an applicable formality.
- Terms
- Void vs. voidable vs. unenforceable
- Difference
- Void means no legal effect, voidable means a protected party may avoid it, and unenforceable means a legal defense blocks enforcement.
- Question cue
- Illegal objective, lack of genuine consent, or missing required writing.
- Terms
- Executed vs. executory
- Difference
- Executed means the required promises have been performed. Executory means one or more duties remain.
- Question cue
- Completed closing and obligations versus performance still due.
- Terms
- Bilateral vs. unilateral
- Difference
- A bilateral contract exchanges promises. A unilateral contract calls for acceptance by performance.
- Question cue
- I promise if you promise versus I promise if you do.
- Terms
- Option vs. right of first refusal
- Difference
- An option permits purchase on stated terms during a period. A right of first refusal is generally triggered when the owner decides to sell under the right's terms.
- Question cue
- Present power to exercise versus first opportunity after a triggering decision.
- Terms
- Addendum vs. amendment
- Difference
- An addendum adds provisions or information. An amendment changes an agreement already formed.
- Question cue
- Attached additional terms versus later revision to price, date, or duty.
- Terms
- Termination vs. rescission
- Difference
- Termination ends future duties under the governing terms. Rescission seeks to undo the transaction and restore the parties as the law permits.
- Question cue
- Stop future performance versus unwind and restore.
- Terms
- Lease-option vs. lease-purchase
- Difference
- A lease-option gives the tenant a choice to buy. A lease-purchase arrangement generally creates an obligation to complete the purchase according to its terms.
- Question cue
- Right without duty versus promised future purchase.
- Terms
- Gross vs. net vs. percentage lease
- Difference
- The categories allocate operating expenses differently; a percentage lease also ties rent to a stated measure of tenant sales.
- Question cue
- Who pays taxes, insurance, maintenance, and any sales-based rent.
How should you solve a contract question?
- Place the facts on the timeline: negotiation, offer, acceptance, performance, breach, or ending.
- Identify every party and verify capacity, authority, and which party made the latest offer.
- Test mutual assent, lawful purpose, and consideration without assuming earnest money is essential.
- Check whether the Statute of Frauds or another formality requires a signed writing.
- Classify the contract by legal status, promise structure, and performance status.
- Read contingencies, notice methods, deadlines, and remedies exactly as stated.
- For multiple offers, keep each offer and counteroffer chain separate.
- Choose the result that follows the contract and law, not the result that feels most commercially fair.
- Question to ask
- Are the basic formation elements present?
- If yes
- Continue to enforceability
- If no
- The agreement may be void or never formed
- Question to ask
- Was consent genuine and the party protected from avoidance?
- If yes
- Contract can remain binding
- If no
- Contract may be voidable
- Question to ask
- Is every required legal formality satisfied?
- If yes
- Court remedy may be available
- If no
- Agreement may be unenforceable
- Question to ask
- Have all required duties been performed?
- If yes
- Executed
- If no
- Executory
- Question to ask
- Does acceptance require a return promise?
- If yes
- Bilateral
- If no
- Check whether performance accepts a unilateral offer
- Question to ask
- Did the response change a material term?
- If yes
- Counteroffer
- If no
- Possible acceptance if it matches the offer
How do the rules work in scenarios?
Separating consideration from earnest money
Scenario: A buyer and seller sign a purchase agreement exchanging a promise to buy for a promise to sell. The agreement does not require an earnest-money deposit.
- The buyer and seller exchanged promises.
- Mutual promises can provide consideration in a bilateral contract.
- Earnest money is not automatically a separate validity requirement.
Answer: The absence of earnest money alone does not make the agreement invalid.
Tracking a counteroffer
Scenario: The seller offers to sell for $300,000. The buyer signs a response offering $292,000. The seller rejects it, and the buyer then says he accepts $300,000.
- The $292,000 response changed the price.
- That response was a counteroffer, not an acceptance.
- Under the common exam rule, the counteroffer rejected the original offer.
Answer: The buyer cannot revive the original $300,000 offer by accepting it unless the seller renews or otherwise agrees.
Applying an inspection contingency
Scenario: A signed purchase contract permits the buyer to terminate by written notice within five days after inspection. The buyer dislikes the report but misses the stated deadline.
- The contingency creates a contractual right subject to conditions.
- The right requires the specified notice within the stated period.
- Private dissatisfaction does not itself satisfy the notice requirement.
Answer: The buyer should not assume the contingency still permits termination after the deadline.
Recognizing a valid electronic process
Scenario: Authorized parties intentionally sign a complete agreement electronically, receive accessible copies, and the audit record shows delivery.
- The parties intended to sign and had authority.
- The record can be retained and accurately reproduced.
- Federal law does not allow denial of legal effect solely because the record and signatures are electronic.
Answer: Electronic form alone is not a reason to treat the agreement as invalid.
What are the common exam traps?
- Trap
- Every valid contract must be notarized.
- Correction
- Notarization is not a universal formation element. Apply it only when a law, instrument, or transaction requires it.
- Trap
- No earnest money means no consideration.
- Correction
- Mutual promises can supply consideration; earnest money is a separate contract term.
- Trap
- A signed contract is already executed.
- Correction
- Signed addresses execution in one sense, but exam classification usually calls a contract executory while duties remain.
- Trap
- A voidable contract is automatically void.
- Correction
- A voidable contract remains effective unless the party entitled to avoid it acts.
- Trap
- A counteroffer keeps the original offer open.
- Correction
- Under the standard exam rule, a counteroffer rejects the original and creates a new offer.
- Trap
- An optionee must buy the property.
- Correction
- The optionee ordinarily has the right, not the obligation, to buy by timely exercise.
- Trap
- Any electronic click creates an enforceable signature.
- Correction
- Intent, attribution, consent, authority, record integrity, and other legal requirements still matter.
- Trap
- The highest offer must be accepted.
- Correction
- A seller can weigh price, financing, contingencies, timing, risk, and other lawful terms.
- Trap
- A broker may interpret an ambiguous remedy clause for the client.
- Correction
- A broker can explain factual process within training but should not provide legal advice or decide disputed rights.
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 response most clearly creates a counteroffer rather than an acceptance?
- I accept the $310,000 offer exactly as written
- I accept if the price is changed to $300,000
- I received the offer
- I would like my attorney to review the offer before I respond
Show answer and explanation
Answer: B
Changing the price makes the response conditional and creates a counteroffer rather than a mirror acceptance.
2. A contract was validly formed, but one protected party may elect to avoid it because consent was obtained through duress. How is it best classified?
- Executed
- Voidable
- Unilateral
- Automatically void
Show answer and explanation
Answer: B
Voidable means the contract can be avoided by the party the law protects. It is not automatically without effect from inception.
3. Which statement best describes an enforceable option to purchase?
- Both parties must close immediately
- The optionee may choose whether to exercise within the option period
- The optionor may revoke at any time despite the option terms
- The option transfers title when signed
Show answer and explanation
Answer: B
The optionee receives a right to purchase on the stated terms but ordinarily has no duty to exercise it.
4. The parties want to change the closing date in an already signed purchase agreement. Which document is most directly suited to that change?
- Amendment
- Appraisal
- Deed restriction
- Listing advertisement
Show answer and explanation
Answer: A
An amendment changes terms of an existing agreement. The required parties must consent as the agreement and law require.
5. A purchase contract has been signed, but inspection, financing, closing, and delivery of the deed remain. What is its performance status?
- Executed
- Executory
- Void
- Unilateral only
Show answer and explanation
Answer: B
The contract is executory because important duties remain to be performed.
How should you study this area?
- Session
- 1. Formation
- Focus
- Capacity, offer, acceptance, lawful purpose, consideration, and Statute of Frauds
- Proof you are ready
- Diagnose formation and enforceability from a short fact pattern.
- Session
- 2. Classifications
- Focus
- Valid, void, voidable, unenforceable, bilateral, unilateral, executed, and executory
- Proof you are ready
- Apply all three classification axes without mixing them.
- Session
- 3. Mechanics
- Focus
- Notice, delivery, signatures, authority, electronic records, addenda, and amendments
- Proof you are ready
- Identify the effective document and missing procedural step.
- Session
- 4. Performance and remedies
- Focus
- Duties, contingencies, breach, damages, specific performance, rescission, and termination
- Proof you are ready
- Match the affected party and remedy to the contract facts.
- Session
- 5. Purchase and lease forms
- Focus
- Purchase agreements, leases, lease types, lease-option, and lease-purchase
- Proof you are ready
- Classify the agreement and allocate the main rights and expenses.
- Session
- 6. Offer strategy
- Focus
- Multiple offers, counteroffers, confidentiality, seller choice, backup offers, and documentation
- Proof you are ready
- Track three simultaneous offer chains without combining them.
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.
Contracts: Illinois Broker Exam Study Guide FAQ
How much of the Illinois broker exam is Contracts?
Contracts is 19% of the national broker portion, or about 19 of the 100 scored national items. It is the largest national content area in the current PSI outline.
What elements are generally needed for a valid contract?
Exam questions usually look for competent parties, mutual assent through offer and acceptance, a lawful objective, and consideration. A separate writing or signature requirement can affect enforceability under the Statute of Frauds.
Is earnest money required to create every real estate purchase contract?
No. Consideration is required, but earnest money is not automatically required for every valid purchase contract. Follow the agreement and the facts in the question. A promise exchanged for a promise can supply consideration in a bilateral contract.
What is the difference between void, voidable, and unenforceable?
A void agreement has no legal effect from the beginning. A voidable contract can be avoided by a party entitled to do so. An unenforceable agreement may have the appearance or elements of a contract but cannot be enforced because of a legal defense, such as failure to meet an applicable writing requirement.
What is the difference between an addendum and an amendment?
An addendum adds terms or information to the agreement, often when the contract is formed. An amendment changes an existing agreement after formation. The parties whose rights are affected must agree as the contract and law require.
What happens when an offeree makes a counteroffer?
Under the common exam rule, a counteroffer rejects the original offer and creates a new offer. The original offer does not automatically return if the counteroffer is rejected. Read the form and facts for any different result.
What is the difference between an option and a purchase contract?
An option gives the optionee the right, but not the obligation, to purchase on stated terms during the option period. The optionor is bound to keep the offer open when the option is enforceable. A bilateral purchase contract creates obligations for both buyer and seller.
Are electronic signatures valid on real estate contracts?
Federal law generally says a signature or contract in an interstate or foreign commerce transaction may not be denied legal effect solely because it is electronic. Electronic delivery, consent, attribution, retention, and any transaction-specific requirements still matter.
Can a seller accept more than one offer?
A seller may receive and consider multiple offers, subject to duties and existing agreements, but accepting incompatible contracts can create serious liability. A broker should present offers as required, follow lawful instructions, avoid unauthorized disclosure, and document the process.
Are these contract questions copied from the PSI exam?
No. Every practice question here is original and aligned to the published outline. It teaches tested relationships without using confidential live questions.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- Illinois General Assembly, 740 ILCS 80 Frauds Act
- U.S. Code, 15 USC 7001 electronic records and signatures
- U.S. Code, 15 USC 7006 definitions
- Illinois General Assembly, 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.