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National V Contracts study guide

Contracts for the Illinois broker exam

Before deciding who can cancel, ask whether there is a contract and what it says. A counteroffer before acceptance is different from an amendment after formation. A missed contingency deadline is different from an automatic right to recover earnest money. Put the events in order, then identify the right or duty the question actually asks about.

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The short answer

The national Contracts area covers general contract law, purchase and lease contracts, and multiple offers and counteroffers. Start with formation and enforceability, then classify promises and performance. Read option exercise, contingencies, notices and changes under their stated terms. Keep a party’s contract remedy separate from a broker’s authority to change documents or disburse disputed funds.

PSI’s June 24, 2026 broker outline assigns 19 of 100 scored national questions to the whole Contracts area, the largest national allocation. It does not assign 19 questions to options, leases or this page. General teaching concepts are separated from labeled Illinois provisions. These original questions are a selected learning sample, not a complete exam simulation, live PSI items or a validated readiness test.

Follow the contract from proposal to performance

  1. Find the stage and the parties. A proposal, accepted contract, supported option and request under an existing attorney-review clause are different starting points. Identify who made the latest offer, who has authority and whether an earlier obligation already exists.
  2. Test formation and enforceability separately. Mutual assent, competent parties, lawful purpose and consideration matter. In a bilateral purchase agreement, exchanged promises can supply consideration; earnest money is not a universal additional formation element. Apply the writing and signature rule to the agreement and remedy involved.
  3. Read the response to an offer as a whole. Conditional acceptance can be a counteroffer. Do not assume a changed term is harmless because it seems minor, or that every inquiry rejects an offer. A valid option or a clause in an already formed contract requires its own analysis.
  4. Classify along separate axes. Bilateral and unilateral concern the requested exchange or mode of acceptance. Void, voidable and unenforceable concern legal effect or enforcement. Executed and executory can describe completed versus remaining performance; executed can also legitimately describe a signed document.
  5. Give the condition, notice and deadline their actual effect. A condition can govern a duty without preventing a contract from existing. Check whether notice must be sent or received, the permitted method and the stated consequence. A contingency is not a free cancellation right after its conditions have been missed.
  6. Check changes and electronic records. Illinois UETA protects qualifying electronic transactions, but consent to transact electronically, attribution, authority and other law still matter. Illinois licensees must follow Rule 1450.775 for signed-document changes, contemporaneous signatures or initials and true copies. A platform timestamp is evidence, not a universal cure.
  7. Separate the purchase from the lease. A lease allocates possession, rent and other duties. An option gives a purchase choice under its terms; a purchase promise can create an obligation. Read who pays expenses in a gross, net, modified or percentage lease rather than inferring every payment from a label.
  8. Match a breach to the requested remedy. Damages, an enforceable liquidated amount, specific performance, rescission and termination have different purposes and conditions. A party’s asserted right to money is not the same as a broker’s authority to release known disputed escrow. Do not decide a private dispute from the remedy’s name. A definite, unequivocal pre-performance refusal can raise anticipatory repudiation; an ambiguous concern about performance is not automatically the same event. Mitigation and the actual remedy provisions still require separate analysis.
What changed, and which question follows?
Supplied eventMain questionDo not assume
A price-conditioned reply to a live ordinary offerAcceptance or counteroffer?Only a material change can matter
A request under an existing review clauseWhat does the actual clause and communication do?Every request cancels the formed contract
Promises exchanged without a deposit requirementIs there legally sufficient consideration?No earnest money means no contract
Parties sign but closing duties remainSigning or performance status?Signed means fully performed
Buyer asks to use a contingencyWere its conditions, method and deadline satisfied?Dissatisfaction alone is effective notice
Closing date changes after signingRequired assent and document-change procedure?A licensee may silently edit the date
An email is opened after a deadlineWhen was it received under the controlling rule?Opened and legally received are always identical
A seller demands the depositContract entitlement and escrow-dispute procedure?A demand alone authorizes release
A lease uses percentage rentWhich sales, rate, base and threshold apply?All sales are necessarily charged again
More than one offer arrivesClient decision, duties, confidentiality and existing contracts?Highest price must win

The distinctions that matter

Contracts: key distinctions
DistinctionHow it worksWhat to notice
Offer vs. contractAn offer invites acceptance on stated terms. Contract formation requires the applicable elements and effective assent. A supported option can limit revocation; not every unanswered proposal is freely revocable.Is there an offer awaiting acceptance or an existing obligation?
Valid vs. enforceableFormation and requested enforcement are separate questions. A writing requirement or defense can affect enforcement without proving that every agreement or every alternative claim is void.Identify the defect and the relief requested.
Void vs. voidableVoid identifies no contractual effect from the outset. Voidable identifies a protected right to avoid an otherwise effective contract. An ordinary breach does not automatically put a contract in either category.No contractual effect or a protected election?
Executed vs. executoryIn performance terminology, executed means completed and executory means obligations remain. In document usage, executed can mean signed. Both meanings are legitimate in context.Does the question ask about signing or performance?
Bilateral vs. unilateralA bilateral contract exchanges promises. A unilateral offer calls for the requested performance as acceptance. Beginning performance and revocation can raise additional rules; the label alone does not settle every intermediate event.Return promise or requested performance?
Option vs. right of first refusalAn enforceable option gives a purchase choice under stated terms. A right of first refusal operates on its specified trigger and matching procedure. Neither name alone supplies a deadline, price or notice method.Existing exercise power or a right triggered under its terms?
Addendum vs. amendmentAn addendum supplies additional provisions or information; an amendment changes an existing agreement. The operative words, formation stage and required assent matter more than the document’s title.Additional terms or an agreed change to existing obligations?
Termination vs. rescissionTermination addresses ending duties under the governing terms and law; some accrued or surviving rights may remain. Rescission seeks to unwind the transaction with the restoration the applicable law requires.End future duties or seek to unwind and restore?
Lease-option vs. lease-purchaseA lease-option supplies a purchase choice. A lease-purchase can contain an enforceable future purchase obligation. Substance, conditions and actual documents control, not a rent-to-own advertisement alone.Choice to buy or an existing purchase promise?
Gross vs. net vs. percentage leaseGross and net terminology describes expense allocation; modified arrangements can divide it further. A percentage lease links rent to defined sales, often with base rent and a threshold. Read the formula and expense clauses.Which expenses and which sales measure does the tenant pay?
Liquidated damages vs. specific performanceLiquidated damages are an agreed amount or measure of breach loss, enforceable only if the legal conditions are met. Specific performance seeks an order requiring the promised performance and is not automatic because the subject is land.Agreed money measure or an equitable performance order?
Contract right vs. escrow release authorityA buyer or seller can assert a contractual entitlement while the broker still faces a known dispute over release. Illinois’s escrow-dispute rule governs the broker’s handling; the broker does not decide ownership merely by choosing a side.Whose legal power is being asked about?

Work through the facts

Consideration without an earnest-money requirement

Competent parties validly exchange a promise to buy and a promise to sell in a signed lawful purchase agreement. The agreement does not require an earnest-money deposit.

  1. The exchanged promises can supply consideration.
  2. The exercise supplies the other formation facts.
  3. A deposit required by a different contract would create a separate performance issue.

Answer: No earnest money does not, by itself, make this supplied agreement invalid.

A counteroffer does not revive the earlier offer

Seller makes an ordinary $300,000 offer, with no supported option or existing review-clause arrangement. Buyer responds, “I will buy only if the price is $292,000.” Seller rejects that response. No renewal of the original offer is supplied.

  1. The buyer’s response expressly conditions assent on a new price.
  2. The ordinary counteroffer rejects the original offer and proposes a new one.
  3. Rejecting the counteroffer does not automatically renew the original.

Answer: Buyer cannot revive the original offer merely by announcing acceptance of $300,000. Different option terms or an existing contract clause would need separate analysis.

An inspection clause with a missed notice deadline

A valid signed purchase contract permits termination by written notice received within five days after inspection. Buyer dislikes the report but the required notice is not received within that period. No extension, waiver, other termination ground or legal exception is supplied.

  1. The contract already exists; the clause supplies a conditional termination right.
  2. Private dissatisfaction is not the required notice.
  3. The supplied missed deadline does not preserve that particular right by itself.

Answer: Do not assume this inspection clause still permits termination. This does not decide every possible claim or an actual notice dispute.

Electronic form is not the defect

Authorized parties agree to conduct this covered transaction electronically, intentionally sign a complete agreement and receive copies they can retain and reproduce. The record supports attribution and delivery, and no other unmet formality is supplied.

  1. Electronic form alone is not a reason to deny the qualifying record legal effect.
  2. Consent, intent, attribution, authority and retention are supplied rather than assumed from a click.
  3. Other applicable contract and consumer-disclosure requirements remain separate.

Answer: The electronic form alone does not make the supplied agreement invalid. The example does not approve a private platform, signature or notice.

A signed closing date is changed

After both parties sign, a licensee changes the closing date without the written consent or direction of all signatories and without their signatures or initials on the change.

  1. This changes a signed transaction document.
  2. Illinois Rule 1450.775(b) requires the specified written consent or direction and signatures or initials for processing the alteration.
  3. A later convenient date does not supply the missing authorization.

Answer: The licensee cannot treat that unilateral edit as an authorized amendment. The rule applies to physical and electronic written agreements.

A deposit demand is contested

Seller demands the earnest-money deposit after alleging buyer default. Buyer tells the Illinois sponsoring broker that the proposed release is contested. No qualifying agreed release, court process or other authorized resolution is supplied.

  1. An alleged default is a contract-entitlement question.
  2. The broker has actual knowledge of a contest over release.
  3. The broker must follow the applicable escrow-dispute procedure rather than adjudicate the competing claims.

Answer: A seller’s demand alone does not authorize the broker to pay the known disputed deposit to the seller.

An agreed purchase choice

A valid, separately supported option gives the optionee a choice to buy for a stated price during a stated period. It supplies the required exercise method. No exercise has occurred.

  1. The optionor must respect the enforceable option obligation.
  2. The optionee ordinarily need not exercise merely because the option exists.
  3. Exercise and the resulting duties depend on satisfying the option terms.

Answer: A purchase choice is established, not an already exercised purchase or an automatic transfer of title.

The lease’s actual rent formula

A hypothetical valid commercial lease sets $2,000 monthly base rent plus 5% of that month’s defined sales above $40,000. Defined monthly sales are $80,000. Assume no other charge or adjustment.

  1. Excess sales are $80,000 minus $40,000, or $40,000.
  2. The percentage addition is $40,000 × 0.05 = $2,000.
  3. Add the $2,000 base rent once.

Answer: $4,000 monthly rent under the supplied formula. This is not a claim that every percentage lease has this formula or expense allocation.

Received is not always the same as opened

A covered Illinois electronic transaction and the parties’ valid agreement use the applicable UETA receipt rule without a different agreed receipt term. A processable notice enters the recipient’s designated system and is retrievable at 4:55 p.m. Monday. The deadline is receipt by 5 p.m. Monday. The recipient first opens it Tuesday. Assume no other notice defect.

  1. The facts supply the designated system, processable form and retrievability.
  2. Under the supplied receipt rule, an individual need not already be aware of receipt.
  3. A different contractual method or other applicable law could require a different analysis.

Answer: The supplied receipt event occurred Monday at 4:55 p.m.; opening it Tuesday does not, by itself, move receipt to Tuesday. This does not certify a private email or option exercise.

One agreed monetary measure, not two added together

A hypothetical contract has a valid, enforceable $15,000 liquidated-damages provision expressly making it the sole monetary remedy for this specified breach. Actual covered loss is claimed to be $22,000. No other damages category or contrary term is supplied.

  1. Validity and the sole-monetary scope are expressly assumed, not inferred from the amount.
  2. The clause supplies the agreed monetary measure for this breach.
  3. Adding $22,000 actual damages to $15,000 would disregard the stated sole measure.

Answer: The supplied monetary measure is $15,000, not $37,000. A liquidated clause alone does not decide whether a separately permitted nonmonetary remedy is available; the actual terms and equitable requirements matter.

Mistakes to avoid

  • No earnest money means no consideration. Exchanged promises can supply consideration. Whether a required deposit was timely paid is a separate contract-performance question.
  • Executed has only one legitimate meaning. It can mean signed or fully performed in context. Substantial remaining closing duties make performance executory.
  • Only a material change can turn acceptance into a counteroffer. Illinois strict-acceptance analysis does not provide a general minor-change safe harbor. Distinguish an actual condition from a mere inquiry and apply the existing agreement, if any.
  • A contingency means no contract exists. A condition can govern performance or a termination right under a formed contract. The actual condition and consequence control.
  • The word amendment authorizes a licensee to edit a signed contract. Required agreement and signed-document procedures still apply. A label does not establish consent, consideration where needed or authority.
  • An electronic click cures every missing requirement. Electronic form does not replace intent, attribution, authority, agreed electronic dealings or other applicable formalities.
  • A deposit labeled liquidated damages is automatically forfeited. Enforceability, the actual remedy clause and escrow-release procedure are separate questions.
  • A seller must accept the highest offer. The seller chooses among lawful terms, subject to existing obligations and nondiscrimination requirements. The broker’s duties do not make price the only lawful factor.
  • Specific performance is guaranteed whenever land is involved. A court evaluates the applicable legal and equitable requirements. The label does not establish entitlement or remove defenses.
  • A broker can decide the legal effect of an ambiguous remedy clause. Work within actual authority and the narrow permitted form-completion role. Disputed legal interpretation or drafting beyond that role needs appropriate legal advice.

24 questions about contract sequence and consequences

These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.

1. Which response most clearly conditions acceptance of a live ordinary $310,000 offer on a changed price?

  1. I received the offer
  2. I accept only if the price is changed to $300,000
  3. I would like my attorney to review the offer before I respond
  4. I accept the $310,000 offer exactly as written
Show answer and explanation

Answer: B. I accept only if the price is changed to $300,000

The reply expressly makes a changed price a condition. A mere acknowledgment or request to review is not the same as accepting or expressly counteroffering; an existing review clause needs separate analysis.

2. A validly formed contract remains effective unless a protected party elects to avoid it on an established duress ground. Which classification matches the supplied legal consequence?

  1. Executed
  2. Unilateral
  3. Automatically void
  4. Voidable
Show answer and explanation

Answer: D. Voidable

The supplied protected right of avoidance fits voidable. An allegation of pressure alone does not prove the defense, and performance and promise structure are different classification questions.

3. Which statement best describes a valid enforceable option to purchase before exercise?

  1. The optionee may choose whether to exercise in accordance with the option terms
  2. The option transfers title when signed
  3. Both parties must close immediately
  4. The optionor may revoke at any time despite the enforceable option
Show answer and explanation

Answer: A. The optionee may choose whether to exercise in accordance with the option terms

An enforceable option gives the optionee a purchase choice and binds the optionor as provided. Proper exercise and later transfer require their own conditions.

4. The parties validly agree to change the closing date in an existing signed purchase contract. Which document function is most directly suited to that change?

  1. Listing advertisement
  2. Deed restriction
  3. Amendment
  4. Appraisal
Show answer and explanation

Answer: C. Amendment

An amendment changes an existing agreement. Required assent, any applicable consideration and Illinois signed-document procedures remain necessary; the title alone is not authorization.

5. A purchase contract has been signed, but inspection, financing, payment and deed delivery remain. In a performance-status comparison, which term fits?

  1. Fully performed
  2. Executory
  3. Unilateral only
  4. Void solely because closing is later
Show answer and explanation

Answer: B. Executory

Important duties remain, so performance is executory. Executed can legitimately describe the signed document in another context.

6. Competent parties exchange legally sufficient promises in a lawful, validly assented purchase agreement that does not require a deposit. Does the absence of earnest money alone establish lack of consideration?

  1. Yes; a promise can never have legal significance
  2. No; the exchanged promises can supply consideration
  3. No; consideration is never relevant to contracts
  4. Yes; every purchase contract requires a cash deposit
Show answer and explanation

Answer: B. No; the exchanged promises can supply consideration

Earnest money and consideration are distinct. The exercise expressly supplies sufficient promises and no deposit requirement; a different contract’s required deposit still matters.

7. Which pair identifies the mode of exchange in a bilateral contract?

  1. A protected election for a court judgment
  2. Promise for promise
  3. Performance status for recorded title
  4. A deed for constructive notice in every case
Show answer and explanation

Answer: B. Promise for promise

Bilateral describes exchanged promises. It does not mean both sides have already performed or that every formality has been met.

8. A genuine unilateral offer requests specified completed performance as acceptance. Which mode of acceptance is supplied?

  1. A broker’s unauthorized signature
  2. The requested performance
  3. A return promise in every case
  4. Recording an unrelated easement
Show answer and explanation

Answer: B. The requested performance

The exercise supplies the unilateral mode. Beginning performance and attempted revocation can raise additional rules; this question does not decide those intermediate facts.

9. For a covered Illinois land-sale promise, whose signed writing is required by the Frauds Act rule when enforcement is sought against that party, absent an exception or cure?

  1. The party to be charged or that party’s authorized agent
  2. The recording officer only
  3. Every neighbor on the block
  4. Any unrelated witness only
Show answer and explanation

Answer: A. The party to be charged or that party’s authorized agent

Section 2 requires the covered agreement or memorandum to be in writing and signed by the party to be charged or an authorized agent. Do not turn that into a universal both-parties-sign-every-document rule or every-oral-agreement-is-void claim.

10. A qualifying Illinois electronic transaction uses an electronic record and signature. Does electronic form alone defeat legal recognition under UETA?

  1. No; every click automatically supplies authority and assent
  2. Yes; UETA was replaced by the old Electronic Commerce Security Act
  3. No; applicable electronic recognition rules protect qualifying records
  4. Yes; every real estate document must be handwritten
Show answer and explanation

Answer: C. No; applicable electronic recognition rules protect qualifying records

UETA protects qualifying electronic form. Consent, attribution, authority, substantive law and other requirements remain; the old Illinois electronic statute is not the current substitute.

11. A licensee changes a signed Illinois transaction document. What does Rule 1450.775(b) require for the alteration described by the rule?

  1. Only a new file name
  2. Only the licensee’s belief that the change is useful
  3. Written consent or direction from all signatories and the required signatures or initials on each change
  4. Only the buyer’s silence when the seller changes a duty
Show answer and explanation

Answer: C. Written consent or direction from all signatories and the required signatures or initials on each change

The rule requires the specified all-signatory authorization and contemporaneous signing or initialing for processing an altered document. It applies to physical and electronic written agreements.

12. Under Rule 1450.775(c), when is a true copy of the original or corrected transaction document due to the person who signed or initialed it?

  1. Within 24 hours after signing or initialing the original or correction
  2. Within 24 business days after funding
  3. Only if the person separately pays for a copy
  4. Only at closing
Show answer and explanation

Answer: A. Within 24 hours after signing or initialing the original or correction

The rule uses 24 hours after signing or initialing, not 24 business days or a closing-based clock. The copy obligation is separate from whether a purchase has closed.

13. An inspection clause requires written termination notice received by a stated deadline. The deadline passes without that notice, and no extension, waiver or other ground is supplied. What is the sound conclusion?

  1. Private dissatisfaction necessarily counts as timely notice
  2. Do not assume the missed clause still permits termination
  3. The buyer automatically receives every deposit
  4. The original offer must still be open
Show answer and explanation

Answer: B. Do not assume the missed clause still permits termination

A contractual termination right can depend on method and timing. This does not adjudicate other possible legal rights or a disputed actual receipt.

14. A purported acceptance changes an offered term that its sender calls minor. What should you avoid assuming under Illinois strict-acceptance analysis?

  1. That the full words and existing agreement matter
  2. That calling the change minor guarantees an effective acceptance
  3. That a mere inquiry can require separate interpretation
  4. That communication requirements can matter
Show answer and explanation

Answer: B. That calling the change minor guarantees an effective acceptance

Finnin rejects an automatic safe harbor based on calling changes minor. A request under an existing attorney-review clause, as in Patel’s different facts, is a separate analysis.

15. A party seeks a court order requiring promised conveyance under an enforceable land contract. Which remedy is requested, without deciding entitlement?

  1. Liquidated damages only
  2. Specific performance
  3. Automatic rescission in every case
  4. A unilateral license
Show answer and explanation

Answer: B. Specific performance

Specific performance requests the promised performance. A court must still evaluate contract and equitable requirements; land’s uniqueness alone does not guarantee the order.

16. An agreement sets a breach-loss amount or formula in advance. Which remedy category is being described, subject to enforceability?

  1. A grantee’s acknowledgment
  2. Constructive notice
  3. Liquidated damages
  4. A title survey
Show answer and explanation

Answer: C. Liquidated damages

The category is an agreed breach-loss measure. The label does not automatically make a penalty enforceable or authorize a broker to release a contested deposit.

17. An Illinois broker actually knows the proposed earnest-money disbursement is contested. Does one party’s assertion of contractual entitlement alone let the broker decide and pay that party?

  1. No; funds can never be released through any authorized resolution
  2. Yes; the first written demand always wins
  3. No; the applicable escrow-dispute procedure must be followed
  4. Yes; a broker’s legal prediction replaces the dispute rule
Show answer and explanation

Answer: C. No; the applicable escrow-dispute procedure must be followed

Rule 1450.750(h) addresses the known controversy. Legal entitlement and authority to disburse are separate, and the applicable authorized resolution must be followed.

18. A lease grants a valid purchase option but no exercise or separate purchase promise is supplied. Does the lease-option label alone mean the tenant must buy?

  1. No; an option can never become binding through exercise
  2. No; the supplied option is a choice under its terms
  3. Yes; every tenant automatically promises to purchase
  4. Yes; rent payments transfer title in every case
Show answer and explanation

Answer: B. No; the supplied option is a choice under its terms

The option supplies a choice; exercise and the resulting duties require their stated conditions. Substance controls over a rent-to-own label.

19. A supplied percentage lease requires $2,000 base rent plus 5% of monthly sales above $40,000. Defined sales are $80,000 and no other charge applies. What rent results?

  1. $4,000
  2. $8,000
  3. $2,000
  4. $6,000
Show answer and explanation

Answer: A. $4,000

Excess sales are $40,000; 5% is $2,000. Add the $2,000 base once. Actual leases can use different bases, thresholds, sales definitions and expense allocations.

20. A seller receives offers with different prices, financing and contingencies, with no conflicting existing acceptance supplied. Must the seller choose the highest price solely because it is highest?

  1. No; lawful terms and the seller’s decision must be considered
  2. Yes; price is the only lawful factor
  3. Yes; the broker is required to choose instead
  4. No; fair-housing requirements never apply
Show answer and explanation

Answer: A. No; lawful terms and the seller’s decision must be considered

Client choice does not remove existing obligations, nondiscrimination or brokerage duties. Price is not the only possible lawful factor.

21. A permitted assignment transfers a buyer’s contract rights. No agreement extinguishing the original obligation and releasing the original obligor is supplied. Which conclusion is justified?

  1. The original obligor is necessarily released
  2. Every assignment transfers title to the land immediately
  3. The seller must refund every payment
  4. The assignment alone does not establish a novation or automatic release
Show answer and explanation

Answer: D. The assignment alone does not establish a novation or automatic release

Assignment concerns rights and delegation concerns duties. Novation requires the necessary agreement, valid new obligation and extinguishment of the old; consent to assignment alone is not necessarily that release.

22. A party seeks to unwind a transaction and restore the parties as the applicable law requires. Which remedy category is requested, without deciding entitlement?

  1. A percentage lease
  2. Rescission
  3. Constructive notice
  4. Automatic performance completion
Show answer and explanation

Answer: B. Rescission

Rescission seeks unwinding and restoration. Grounds, promptness, restoration conditions and any applicable exceptions or adequate-remedy issue must be evaluated; a desire to cancel alone does not establish entitlement.

23. Under a supplied applicable UETA receipt rule, a processable notice enters the recipient’s designated system and is retrievable before the deadline. No different agreement or other defect is supplied. Does opening it the next day alone make receipt late?

  1. No; every sent email is necessarily received immediately
  2. No; receipt and an individual’s later awareness are distinct
  3. Yes; all electronic notices are received only when opened
  4. Yes; electronic form always defeats notice
Show answer and explanation

Answer: B. No; receipt and an individual’s later awareness are distinct

Section 15’s supplied receipt conditions matter. The rule can recognize receipt without an individual’s awareness; an actual agreement, system or other applicable law could change the analysis.

24. A commercial lease is described as net, but its actual expense clauses allocate only specified operating costs to the tenant. What should determine the supplied allocation question?

  1. The name alone makes every possible expense the tenant’s
  2. The percentage rent formula in a different lease
  3. The lease must be a purchase contract
  4. The actual expense clauses, rather than an assumption that every net lease transfers all costs
Show answer and explanation

Answer: D. The actual expense clauses, rather than an assumption that every net lease transfers all costs

Net arrangements can allocate all or some expenses. Read the actual tax, insurance, maintenance and other provisions; labels and modified arrangements do not supply one universal formula.

Common questions

How much of the Illinois broker exam is Contracts?

The whole national Contracts area has 19 of 100 scored questions in PSI’s June 24, 2026 broker outline, the largest national allocation. Its branches cover general contract law, purchase and lease contracts, and multiple offers and counteroffers. That is not a 19-question allocation for each branch or this selected practice set.

What generally makes a contract valid?

Competent parties, mutual assent, lawful purpose and legally sufficient consideration are core formation questions. Authority, required terms and the particular transaction matter too. Check a required writing or signature separately rather than assuming every valid contract is oral, notarized or immediately enforceable.

Is earnest money necessary for every purchase contract?

No. In a bilateral agreement, legally sufficient exchanged promises can supply consideration. A deposit required by the actual agreement still creates a performance obligation. Failure to pay a required deposit and the legal consequences must be analyzed under that agreement and law; neither automatic invalidity nor harmlessness follows from the word deposit alone.

How are void, voidable and unenforceable different?

Void identifies no contractual effect from the outset. Voidable identifies a protected right to avoid an otherwise effective contract. Unenforceable concerns an obstacle to the requested enforcement. An actual defense, exception, cure or separate restitution claim requires its own analysis; the labels do not mean every possible remedy is unavailable.

Can executed mean signed even if closing has not happened?

Yes. Executed can legitimately describe a signed document. In a performance comparison, executed means completed and executory means duties remain. The question’s context controls; a signed purchase agreement with future closing duties remains executory as to performance.

Does a counteroffer reject the original offer?

Under the ordinary offer rule, a conditional counteroffer rejects the original and proposes new terms; rejection of the counteroffer does not itself revive the original. A supported option, a mere inquiry or a request under an already formed contract’s review clause needs its own analysis. Do not assume only changes called material can matter.

What is the difference between an option and a right of first refusal?

An enforceable option supplies a choice to purchase under stated terms and binds the optionor accordingly. A right of first refusal operates when its stated trigger occurs and under its matching procedure. Neither label alone supplies the price, deadline, method of exercise or consequence of a late notice.

What is the difference between an addendum and an amendment?

An addendum adds provisions or information; an amendment changes an existing agreement. A document’s label alone does not determine its legal effect. Required assent, authority, any applicable consideration and formalities still matter. Illinois licensees must also comply with Rule 1450.775 when signed transaction documents are altered.

Are electronic signatures valid for Illinois real estate contracts?

Electronic form alone does not defeat a qualifying electronic record or signature. Illinois UETA applies to parties agreeing to electronic dealings and preserves other substantive requirements. Intent, attribution, authority, retention and applicable delivery rules matter. Federal E-SIGN has separate conditions for replacing legally required written consumer disclosures; not every click is an authorized binding contract.

What does Illinois require when a signed transaction document is changed?

Rule 1450.775(b) requires written consent or direction from all signatories. A licensee may not process an altered signed document unless each change is signed or initialed by all signatories at the time of the change. Subsection (c) requires a true copy within 24 hours after signing or initialing the original or correction. These rules apply to physical and electronic agreements.

Does an inspection or financing contingency mean there is no contract yet?

Not necessarily. A condition can govern a duty or termination right under an already formed contract. Read the event, beneficiary, required efforts, notice, deadline and consequence. The supplied document and law determine whether the condition affects formation, performance or termination; the heading alone does not decide it.

Can a broker pay disputed earnest money to the party who seems right?

The broker does not adjudicate the dispute. Illinois Rule 1450.750(h) applies when there is the specified written dispute or actual knowledge of a contest. Keep the funds under the applicable dispute procedure until an authorized resolution permits disposition. A party’s demand, default allegation or liquidated-damages label is not by itself that authority.

Is specific performance automatic for a land contract?

No. It requests an order requiring the promised performance, subject to the applicable contractual and equitable requirements and defenses. Damages, liquidated damages and rescission have different functions. A private entitlement cannot be decided merely by saying land is unique. A liquidated-damages provision also needs an enforceability analysis; an agreed amount is not automatically a lawful penalty, and a sole monetary remedy is not automatically every possible nonmonetary remedy. Illinois evaluates whether the parties intended an advance settlement of breach damages, the amount was reasonable when formed in relation to anticipated harm, and actual damages were uncertain or difficult to prove. No fixed deposit percentage is automatically valid.

Are these official PSI questions or a readiness test?

They are original teaching questions, not official or recalled PSI items. This selected set has no official passing mark or validated readiness cutoff. Use the explanations to choose a lesson to revisit, then practise fresh applications across the full PSI content outline.

How do gross, net and percentage leases differ?

Gross and net terminology describes expense allocation, but the actual clauses determine which costs the tenant pays. A net arrangement can allocate all or only specified expenses. Percentage rent depends on the defined sales or earnings measure, rate and any base or threshold. Do not assume every modified gross or net lease uses the same formula.

How should Illinois licensees handle multiple offers?

The client makes the lawful transaction decision. Section 15-15 requires timely presentation unless the duty has been lawfully waived; Section 15-75 imposes separate minimum services for exclusive agreements, so a generic waiver is not a universal answer. Its specified assistance period continues until both a sale or lease contract is signed and all contingencies are satisfied or waived. Preserve confidentiality, obey applicable nondiscrimination rules and avoid incompatible acceptances. Preparing contemporaneous offers for competing buyer clients also has its own disclosure and referral requirements.

Does assignment mean the original buyer is released?

Not automatically. Assignment concerns contract rights and delegation concerns performance duties. A novation requires the necessary parties’ agreement, a valid new obligation and extinguishment of the earlier obligation. Consent to assignment alone does not necessarily express that release. Contract restrictions, writing and authority still matter.

Is there a universal three-day right to cancel a home purchase?

No. A purchase-contract contingency, a statutory cancellation right and a covered credit rescission right are separate. Regulation Z’s closed-end credit rescission rule excludes the ordinary residential acquisition mortgage described in Section 1026.23(f)(1). It is not a general three-day buyer’s-remorse right to undo every house purchase. Identify the actual transaction, law, notice and deadline.

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Official sources and scope

Identified contract authorities and Illinois practice rules reviewed through October 27, 2026. Exact earlier actual primary readings are recorded where reused. National teaching vocabulary is separated from Illinois law and the actual contract’s terms. These examples do not approve a private signature, notice, contract, exercise, cancellation, escrow release, remedy or lease.

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.

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