Contracts & Agency Practice Questions
Real estate contracts and agency is the single heaviest content area on the national portion of the Texas Sales Agent exam at 16 scored items. It tests the four essentials of a valid contract, the Statute of Frauds, void versus voidable, offer and acceptance, how agency is created and terminated, and the fiduciary duties a license holder owes. Work the questions below, then read every explanation.
Exam prep only
Contracts and agency carries the most weight on the national portion, so points here move your whole score. The questions are pattern based. They hand you a fact set and ask whether a contract exists, how to classify it, what happens on breach, or which agency duty is in play.
Use the elements-then-status check. First confirm the four essentials are present, then classify the contract and its current status. Most traps live in the status, such as a counteroffer that quietly terminated the first offer, or a voidable contract a candidate calls void.
Quiz mode · Test yourself
Contracts & Agency Practice Questions
15 scenario-based questions on contracts & agency, scored, each with a full explanation after you answer. Every question is also written out below if you would rather study at your own pace.
Every question explained
Prefer to study at your own pace? Here are all 15 questions. Read each one and pick your answer, then reveal the correct answer, the reasoning, and the trap that catches most candidates.
1. A buyer and seller shake hands on the sale of a vacant lot for $90,000, but nothing is put in writing. Before closing, the seller backs out. Can the buyer force the sale?
- A.Yes, because a verbal agreement on price and property is a binding contract
- B.Yes, because the buyer relied on the seller's promise
- C.No, because under the Statute of Frauds a contract for the sale of real property must be in writing and signed to be enforceable
- D.No, because vacant land cannot be sold without a survey
Show answer and explanation
Correct answer: C. No, because under the Statute of Frauds a contract for the sale of real property must be in writing and signed to be enforceable
Why C is correct: The Statute of Frauds requires that a contract for the sale of real property be in writing and signed by the party to be charged. An oral agreement to sell land is generally not enforceable in court, so the buyer cannot force the sale.
Trap: The oral contract is unenforceable, not automatically void. The parties could still choose to perform; a court just will not force it.
Source: Texas Business & Commerce Code 26.01, Statute of Frauds
2. Which set lists the four essential elements every valid contract must have?
- A.Earnest money, a licensed broker, a survey, and a closing date
- B.Competent parties, mutual assent (offer and acceptance), a lawful purpose, and consideration
- C.A written document, a notary, two witnesses, and recording
- D.Offer, counteroffer, acceptance, and contingency
Show answer and explanation
Correct answer: B. Competent parties, mutual assent (offer and acceptance), a lawful purpose, and consideration
Why B is correct: A valid contract requires competent parties, mutual assent through offer and acceptance, a lawful purpose, and consideration. A real estate contract must also satisfy the Statute of Frauds by being in writing and signed, but the four core essentials are competency, mutual assent, legality, and consideration.
Trap: Earnest money is not an essential element. Consideration is required, but the deposit itself is not.
Source: Contract law; Texas Business & Commerce Code 26.01
3. A buyer offers $320,000. The seller responds with a counteroffer at $335,000. The buyer then says, I accept your original $340,000 list price. Does a binding contract exist?
- A.Yes, because the buyer agreed to a higher price than the seller asked in the counteroffer
- B.Yes, because the list price is a standing offer the buyer can accept anytime
- C.No, because the seller's counteroffer terminated the buyer's original offer, and the buyer's statement is itself a new offer the seller is free to accept or reject
- D.No, because the buyer already rejected the counteroffer, ending all negotiation permanently
Show answer and explanation
Correct answer: C. No, because the seller's counteroffer terminated the buyer's original offer, and the buyer's statement is itself a new offer the seller is free to accept or reject
Why C is correct: When the seller countered, the buyer's original offer was terminated. A list price is an invitation to negotiate, not an offer the buyer can accept. The buyer's statement accepting $340,000 is a brand-new offer that the seller is free to accept or reject.
Trap: A counteroffer kills the original offer. The buyer cannot reach back and accept something that is no longer on the table.
Source: Contract law, offer and acceptance
4. A 16-year-old signs a contract to buy a home. Under contract law, this agreement is
- A.void, because a minor has no legal capacity to contract
- B.voidable at the option of the minor, who may enforce it or disaffirm it
- C.valid and fully binding on the minor
- D.void, because real property cannot be sold to a minor
Show answer and explanation
Correct answer: B. voidable at the option of the minor, who may enforce it or disaffirm it
Why B is correct: A contract with a minor is voidable, not void. The minor may choose to enforce the contract or to disaffirm it. A void contract was never valid at all; a voidable contract is valid until the protected party elects to void it.
Trap: Void and voidable are different. A minor's contract is voidable, giving the minor the choice, not void.
Source: Contract law, capacity
5. A seller signs a valid contract to sell a unique waterfront home, then refuses to close because she received a higher offer. The buyer wants the house, not money. The remedy that forces the seller to complete the sale is
- A.liquidated damages
- B.specific performance
- C.rescission
- D.novation
Show answer and explanation
Correct answer: B. specific performance
Why B is correct: Specific performance is a remedy that forces a party to complete the agreed transaction. It is available because real property is considered unique and money damages may not make the buyer whole. The buyer who wants the property itself seeks specific performance.
Trap: Liquidated damages give money. Specific performance gives the property. Match the remedy to what the wronged party actually wants.
Source: Contract remedies
6. A property owner signs a written agreement authorizing a broker to market the property and represent the owner. This is an example of agency created by
- A.ratification
- B.estoppel
- C.express agreement
- D.implied conduct
Show answer and explanation
Correct answer: C. express agreement
Why C is correct: Agency created through a written or spoken agreement between the principal and the agent is express agency. A listing or representation agreement is the classic example. Agency can also arise by implication, ratification, or estoppel, but a signed authorization is express.
Trap: A signed listing is express agency. Implied, ratified, and estoppel agency all arise without that direct agreement.
Source: Agency law; common law of agency
7. An agent representing a seller learns the seller will accept far less than the list price, then quietly tells the buyer to lowball. Which fiduciary duty did the agent most clearly violate?
- A.Accountability
- B.Obedience
- C.Confidentiality
- D.Reasonable care
Show answer and explanation
Correct answer: C. Confidentiality
Why C is correct: An agent owes the principal fiduciary duties, often taught as OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable care. Revealing the seller's bottom line to the buyer breaches the duty of confidentiality.
Trap: Confidential information about a client's bargaining position stays protected. An agent cannot leak the principal's bottom line to the other side.
Source: Agency law, fiduciary duties
8. Buyer A assigns her purchase contract to Buyer B. Later, all three parties sign a new agreement that substitutes Buyer B for Buyer A entirely and releases Buyer A from any further liability. This release of the original party is accomplished through
- A.assignment
- B.novation
- C.rescission
- D.subrogation
Show answer and explanation
Correct answer: B. novation
Why B is correct: Novation substitutes a new party for an original party with the agreement of everyone involved, and it releases the original party from liability. A plain assignment transfers rights but usually leaves the assignor secondarily liable. The full release is what makes this a novation.
Trap: The dividing line is the release. Assignment moves the rights; novation moves the party and ends the original party's liability.
Source: Contract law, assignment and novation
9. A contract entered for an illegal purpose is best described as
- A.voidable by one party
- B.void, with no legal effect from the start
- C.fully enforceable
- D.valid until a court acts
Show answer and explanation
Correct answer: B. void, with no legal effect from the start
Why B is correct: A contract for an illegal purpose is void; it has no legal effect from the start. A voidable contract is valid until the party with the right (such as a minor or a defrauded party) chooses to disaffirm it.
Trap: Void means it never had effect. Voidable means one party can choose to cancel an otherwise valid contract.
Source: Contract law; void vs voidable
10. An option contract, in which a seller is paid to hold an offer open while the buyer decides, is an example of a
- A.bilateral contract
- B.unilateral contract
- C.void contract
- D.implied contract
Show answer and explanation
Correct answer: B. unilateral contract
Why B is correct: An option is a unilateral contract: the optionor (seller) is obligated to keep the offer open, but the optionee (buyer) is not obligated to buy. A bilateral contract involves promises by both sides.
Trap: An option binds only the seller to keep the offer open. The buyer makes no promise to purchase, so it is unilateral.
Source: Contract law; unilateral contracts
11. After both parties sign a sales contract but before closing, the contract is
- A.executed
- B.executory
- C.void
- D.rescinded
Show answer and explanation
Correct answer: B. executory
Why B is correct: Between signing and closing, obligations remain to be performed, so the contract is executory. Once everything is performed and the deal closes, the contract is executed.
Trap: Executory means still to be performed; executed means fully performed. Signing is not the same as completing.
Source: Contract law; executory vs executed
12. A buyer defaults and the contract states the seller may keep the earnest money as the agreed remedy. The earnest money here functions as
- A.a penalty that courts will not enforce
- B.liquidated damages agreed to in advance
- C.a gift to the broker
- D.a loan to the seller
Show answer and explanation
Correct answer: B. liquidated damages agreed to in advance
Why B is correct: When a contract provides that the seller may retain the earnest money on the buyer's default, the earnest money operates as liquidated damages, a remedy the parties agreed to in advance. The seller may have other remedies depending on the contract.
Trap: Earnest money retained on default is liquidated damages, not an unenforceable penalty, when the contract so provides.
Source: Contract law; liquidated damages
13. An agency relationship between a seller and a broker may be terminated by
- A.performance, expiration, mutual agreement, or revocation
- B.the buyer's preference alone
- C.the weather
- D.nothing; it lasts forever
Show answer and explanation
Correct answer: A. performance, expiration, mutual agreement, or revocation
Why A is correct: An agency can end by full performance (the sale closes), expiration of the term, mutual agreement, revocation, or operation of law such as death or incapacity. It is not a permanent relationship.
Trap: Agency ends in several ordinary ways. A party generally cannot be locked into agency forever.
Source: Agency law; termination
14. A purchase contract is contingent on the buyer obtaining financing, and the buyer cannot get a loan despite a good-faith effort. The buyer generally may
- A.be forced to buy with cash
- B.terminate under the financing contingency and recover the earnest money per the contract
- C.lose the earnest money automatically
- D.sue the lender for the house
Show answer and explanation
Correct answer: B. terminate under the financing contingency and recover the earnest money per the contract
Why B is correct: When a financing contingency is not satisfied despite the buyer's good-faith effort, the buyer can typically terminate under that contingency and recover earnest money as the contract provides. The contingency exists to protect the buyer.
Trap: A failed financing contingency protects the buyer's earnest money; it does not force a cash purchase.
Source: Contract law; contingencies
15. Which agreement must be in writing to be enforceable under the statute of frauds?
- A.A lease for a six-month term
- B.A lease for a three-year term and any contract for the sale of real estate
- C.A verbal agreement to mow a lawn once
- D.An oral promise to paint a fence
Show answer and explanation
Correct answer: B. A lease for a three-year term and any contract for the sale of real estate
Why B is correct: The statute of frauds requires that contracts for the sale of real estate, and leases for a term longer than one year, be in writing and signed to be enforceable. Short-term leases under one year can be oral in many cases.
Trap: Real estate sales and leases over one year must be written. A lease of one year or less may be oral.
Source: Statute of frauds; Texas Business & Commerce Code
15 here, 1,200+ in the app
You found your gaps. Now close them across all 14 areas.
Pass Texas gives you 1,200+ Texas-specific questions, diagnostics across the 14 exam areas, Trap Library, Math Coach, offline access, and one $59.99 purchase. No subscription. No copied exam questions.
Get the full question bankFrequently asked questions
How many contracts and agency questions are on the Texas real estate exam?+
Real estate contracts and agency is the heaviest area on the national portion of the Texas Sales Agent exam, with 16 scored items. Expect scenario questions on contract essentials, the Statute of Frauds, classifications, remedies, and how agency is created, terminated, and what duties it carries.
What is the difference between a void and a voidable contract?+
A void contract was never legally valid and has no effect. A voidable contract is valid and enforceable until the protected party chooses to void it. A minor's contract is voidable, not void, because the minor can elect to enforce or disaffirm it.
What duties does a Texas license holder owe a client versus a customer?+
A license holder owes a client full fiduciary duties, often taught as OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable care. To a customer, who is not represented, the license holder owes honesty, fair dealing, and disclosure of known material facts.
Are these real Texas real estate exam questions?+
These are original, scenario-based questions written at the same format and difficulty as the Texas Sales Agent exam. They are not reproduced Pearson VUE exam items. Each answer cites the contract, agency, or Texas statute it tests.