- Official section
- National V: Contracts
- Broker weight
- 19% of the national broker portion
- Expected scored items
- Performance is one part of about 19 of 100 items
Contracts topic guide
Contract status, performance, and mechanics
Once a contract is formed, the exam shifts from promises to process. Track what remains due, which conditions control performance, who holds each right and duty, and whether a later document adds, changes, transfers, or replaces an obligation.
What does this exam area cover?
Short answer: Know valid status versus performance status, executory and executed contracts, rights and obligations, conditions, contingencies, complete and substantial performance, time clauses, assignment, delegation, novation, addenda, amendments, notice, delivery, signatures, electronic records, and document control.
The public outline tests contract rights, obligations, notice, delivery, acceptance, execution, electronic transactions, addenda, amendments, and contingencies. This guide ties those mechanics into one transaction timeline.
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What is on the official outline?
- Topic
- Validity and performance status
- What to know
- Valid, void, voidable, unenforceable, executory, and executed, with legal status kept separate from completion status
- Best exam move
- First name the legal status, then state whether obligations remain.
- Topic
- Contract rights and duties
- What to know
- Promises to convey, pay, deliver possession, provide marketable title, meet deadlines, cooperate with contingencies, give notices, and act in good faith
- Best exam move
- Write each party's remaining obligations in chronological order.
- Topic
- Conditions and contingencies
- What to know
- Condition precedent, condition subsequent, financing, appraisal, inspection, title, attorney review, property sale, stated satisfaction methods, waiver, expiration, and failure
- Best exam move
- Read the clause for who must act, what must occur, how notice is given, and the exact deadline.
- Topic
- Performance
- What to know
- Complete performance, tender, substantial performance, partial performance, material nonperformance, impossibility, and prevention by the other party
- Best exam move
- Compare actual conduct with the contract's essential purpose and express conditions.
- Topic
- Time and deadlines
- What to know
- Calendar date, business day, notice period, time-is-of-the-essence clause, reasonable time, extension, waiver, and documented delivery
- Best exam move
- Calculate from the contract language and never assume every deadline is automatically material.
- Topic
- Assignment of rights
- What to know
- Assignor, assignee, transfer of benefits, anti-assignment clause, material change to the other party's burden or risk, and required consent
- Best exam move
- Identify the benefit being transferred and whether the contract or its personal nature restricts transfer.
- Topic
- Delegation of duties
- What to know
- Delegator, delegate, obligee, ordinary versus personal performance, continued liability of original obligor, and breach by delegate
- Best exam move
- A delegated duty does not automatically release the original promisor.
- Topic
- Novation
- What to know
- Substitution of party or obligation, agreement of necessary parties, valid new obligation, extinguishment of old obligation, and release
- Best exam move
- Look for consent plus express release, not merely a transfer.
- Topic
- Addenda and exhibits
- What to know
- Additional provisions, disclosures, riders, property lists, association materials, financing terms, incorporation by reference, priority, signatures, and consistency
- Best exam move
- Confirm the added document is identified, attached or available, incorporated, and properly signed.
- Topic
- Amendments
- What to know
- Post-formation change to price, closing, credits, repairs, financing, possession, or another term; mutual agreement; consideration issues; writing; signature; and date
- Best exam move
- Both sides must agree to a contract change; a broker cannot revise a deal unilaterally.
- Topic
- Notice and delivery
- What to know
- Specified recipient, address, method, effective time, actual receipt, deemed receipt, proof, electronic system, and content integrity
- Best exam move
- Follow the contract's notice clause before applying a general communication rule.
- Topic
- Document control
- What to know
- Complete copies, initials, signatures, dates, version control, authority, retention, audit trail, confidentiality, and prompt delivery to parties
- Best exam move
- Use the final accepted version and preserve evidence of what was sent, signed, and received.
Which distinctions produce the most mistakes?
- Terms
- Executory vs. executed
- Difference
- Executory means obligations remain. Executed means performance is complete.
- Question cue
- Signed now, closing later is generally still executory.
- Terms
- Condition vs. promise
- Difference
- A condition controls when a duty arises or continues. A promise is a commitment whose breach may create a remedy.
- Question cue
- Financing must be obtained before duty to close versus buyer promises to apply promptly.
- Terms
- Complete vs. substantial performance
- Difference
- Complete performance matches the obligation. Substantial performance fulfills the essential purpose despite minor defects, subject to damages for the deviation.
- Question cue
- Minor defect versus failure of an essential term.
- Terms
- Assignment vs. delegation
- Difference
- Assignment transfers rights. Delegation transfers duties.
- Question cue
- Right to receive money versus duty to perform work.
- Terms
- Delegation vs. novation
- Difference
- Delegation ordinarily leaves the original obligor responsible. Novation substitutes and releases through a new agreement.
- Question cue
- Did the other party consent to release the original party?
- Terms
- Addendum vs. amendment
- Difference
- An addendum adds material to the agreement. An amendment changes terms of an already formed contract.
- Question cue
- Attached extra terms at formation versus negotiated change after acceptance.
- Terms
- Extension vs. waiver
- Difference
- An extension moves a deadline by agreement. A waiver intentionally relinquishes a contractual right.
- Question cue
- New date versus decision not to enforce a condition.
- Terms
- Sending vs. receipt
- Difference
- Sending and receipt are separate events. A notice clause or electronic-transactions statute defines when each occurs.
- Question cue
- Email leaves sender's control versus enters a designated retrievable system.
How should you track a contract after formation?
- Confirm the final accepted document, signatures, authority, incorporated addenda, and effective date.
- List every remaining duty, condition, notice, document, payment, and deadline by party.
- Mark which events are conditions to performance and which statements are promises.
- Apply the stated notice method, recipient, address, delivery standard, and proof requirement.
- For a transfer, label rights as assignment, duties as delegation, and release as novation.
- For a later document, decide whether it adds material, amends a term, extends time, or waives a right.
- Compare performance with essential obligations and classify any deviation as minor, substantial, or material.
- Preserve the final version, audit trail, and evidence of delivery before declaring the contract executed.
- Action
- Assignment
- What changes
- A contractual right or benefit
- Original party released?
- Not applicable to delegated duties
- Action
- Delegation
- What changes
- Who performs a duty
- Original party released?
- Usually no
- Action
- Novation
- What changes
- Party or obligation through new agreement
- Original party released?
- Yes, as agreed
- Action
- Addendum
- What changes
- Adds terms or material
- Original party released?
- No
- Action
- Amendment
- What changes
- Changes an existing term
- Original party released?
- No
- Action
- Full performance
- What changes
- Outstanding duties completed
- Original party released?
- Contract becomes executed
How do the rules work in scenarios?
Financing contingency with a notice deadline
Scenario: A contract allows the buyer to terminate if financing is denied, but requires written notice to the seller by 5 p.m. Friday. The buyer receives a denial Friday morning and says nothing until Monday.
- The financing clause grants a conditional termination right.
- The contract states a notice method and deadline.
- The buyer did not exercise the right in the prescribed time.
Answer: The buyer should not assume the contingency automatically ended the contract. The missed notice requirement controls the exam analysis.
Delegation without release
Scenario: A party delegates a contractual inspection duty to a qualified company. The company never performs, and the other contracting party never agreed to release the delegator.
- The duty was delegated.
- No facts establish a novation or release.
- Delegation alone ordinarily does not erase the original party's responsibility.
Answer: The original contracting party remains responsible for the unperformed duty.
Changing a repair credit after acceptance
Scenario: After contract formation, the parties agree to replace a $2,000 repair credit with a $3,500 credit.
- The original contract already exists.
- The credit is an existing financial term.
- Changing it requires a clear amendment accepted by both parties.
Answer: Use a written, dated, signed amendment that identifies the original agreement and exact replacement term.
Electronic receipt without content proof
Scenario: A platform confirms that a file entered the recipient's designated system, but the parties dispute whether the final signed amendment or an older draft was attached.
- System acknowledgment can establish receipt.
- Illinois law says acknowledgment alone does not prove that received content matches sent content.
- Version history, hash, audit trail, and retained copies become important evidence.
Answer: Receipt alone does not resolve which version arrived. The transaction record must establish content integrity.
What are the common exam traps?
- Trap
- A signed purchase agreement is already executed in every sense.
- Correction
- When performance remains, the contract is generally executory even though signatures are complete.
- Trap
- Failure of any contingency automatically cancels the contract.
- Correction
- Read the clause for notice, waiver, cure, extension, and termination procedure.
- Trap
- Every deadline is automatically time is of the essence.
- Correction
- Materiality depends on the contract language, applicable law, and facts.
- Trap
- Assignment transfers duties and releases the assignor.
- Correction
- Assignment concerns rights; delegation concerns duties; release requires a novation or other agreement.
- Trap
- A novation can occur without the affected party's consent.
- Correction
- Novation is an agreement and requires consent of the necessary parties.
- Trap
- An addendum and amendment are always synonyms.
- Correction
- For exam purposes, an addendum adds material while an amendment changes an existing contract.
- Trap
- A broker may initial a price change for absent parties.
- Correction
- Only authorized parties or their lawfully authorized representatives may agree to the amendment.
- Trap
- An email is effective notice whenever send is clicked.
- Correction
- Use the contract's notice clause and applicable electronic sending and receipt rules.
- Trap
- A delivery receipt proves the correct attachment.
- Correction
- Receipt confirmation alone may not establish that the content sent equals the content received.
- Trap
- A minor performance defect always excuses the other party completely.
- Correction
- Substantial performance may satisfy the essential bargain while leaving a claim for the minor defect.
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. A signed purchase contract is awaiting financing and closing. What is its performance status?
- Executed
- Executory
- Void
- Rescinded
Show answer and explanation
Answer: B
The parties still have material duties to perform, so the contract is executory.
2. Which transaction transfers a contractual right?
- Delegation
- Assignment
- Tender
- Rescission
Show answer and explanation
Answer: B
Assignment transfers rights or benefits; delegation transfers duties.
3. What most clearly distinguishes a novation from a delegation?
- A novation is always oral
- A novation releases the replaced party by agreement
- A delegation transfers title
- A delegation ends every contract
Show answer and explanation
Answer: B
Novation substitutes and releases through consent; delegation alone generally leaves the original obligor responsible.
4. After acceptance, both parties change the closing date. What document is most appropriate?
- Amendment
- New advertisement
- Deed restriction
- Listing extension only
Show answer and explanation
Answer: A
The parties are changing a term of an existing contract, which calls for an amendment.
5. An electronic system confirms receipt. What does that confirmation not prove by itself under Illinois law?
- That a record entered the system
- That the content received matched the content sent
- That the recipient uses the system
- That the record was electronic
Show answer and explanation
Answer: B
An acknowledgment may establish receipt but does not alone establish content correspondence.
How should you study this area?
- Session
- 1. Status
- Focus
- Valid, void, voidable, unenforceable, executory, and executed
- Proof you are ready
- Classify ten contracts on both legal and performance axes.
- Session
- 2. Duties and conditions
- Focus
- Party obligations, contingencies, condition language, waiver, and deadlines
- Proof you are ready
- Turn three sample contracts into chronological checklists.
- Session
- 3. Performance
- Focus
- Tender, complete performance, substantial performance, material failure, and time clauses
- Proof you are ready
- Explain whether five deviations are minor or material.
- Session
- 4. Transfers
- Focus
- Assignment, delegation, personal duties, consent, continued liability, and novation
- Proof you are ready
- Label rights, duties, parties, and release in eight scenarios.
- Session
- 5. Documents
- Focus
- Addendum, exhibit, amendment, extension, waiver, initials, authority, and version control
- Proof you are ready
- Choose the correct document for ten transaction changes.
- Session
- 6. Notice
- Focus
- Recipient, method, sending, receipt, proof, electronic records, and final audit
- Proof you are ready
- Score at least 90% on mixed contract-mechanics questions.
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.
Contract Status, Performance, and Mechanics FAQ
What is an executory real estate contract?
It is a contract with one or more obligations still to be performed. A signed purchase agreement is usually executory while inspections, financing, title work, closing, payment, and delivery remain outstanding.
When is a contract executed?
In the performance sense, a contract is executed when the parties have completed their contractual obligations. Some questions loosely use executed to mean signed, so read the facts and identify whether they ask about signing or completed performance.
What is a contract contingency?
A contingency makes an obligation or the continuation of the transaction depend on a stated event, such as financing approval, inspection resolution, appraisal, sale of another property, or acceptable title.
What is the difference between an assignment and a delegation?
An assignment transfers contractual rights or benefits. A delegation transfers performance duties. Unless a novation releases the original obligor, delegating a duty generally does not by itself eliminate the original party's responsibility.
What is a novation?
A novation is a new agreement that substitutes a new party or obligation and releases the replaced party or extinguishes the old obligation. Consent of the necessary parties distinguishes it from a simple assignment or delegation.
What is the difference between an addendum and an amendment?
An addendum adds terms, disclosures, or material to the agreement, often when the agreement is formed. An amendment changes an existing contract after formation. Both should be incorporated clearly and signed as required.
Does an electronic receipt prove that the correct document arrived?
Not by itself. Illinois law provides that an electronic system acknowledgment can establish receipt, but alone it does not establish that the content received matches the content sent.
What does time is of the essence mean?
It signals that performance by the stated deadline is a material contractual requirement. Without that clause, the effect of delay depends on the agreement, applicable law, and circumstances rather than on a universal automatic cancellation rule.
What is substantial performance?
It is performance that fulfills the essential purpose of the contract despite immaterial deviations. A material failure that defeats the agreement's purpose is not substantial performance and can support breach remedies.
Are the practice questions copied from the licensing exam?
No. They are original study items built from the public content outline and general contract principles.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- 815 ILCS 333, Illinois Uniform Electronic Transactions Act
- Cornell Legal Information Institute, assignment
- Cornell Legal Information Institute, novation
- Cornell Legal Information Institute, substantial performance
- Cornell Legal Information Institute, condition precedent
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.