Quick answer
A valid contract needs mutual assent, consideration, legal capacity, a lawful purpose, and for real estate, a writing signed by the party to be charged. Remove any one and the contract is void, voidable or unenforceable, and the exam's whole game is making you say which.
Contracts carry 19 percent of the national portion, more than any other area. The good news is that the questions are repetitive once you see the pattern, because there are only so many ways a contract can fail.
The elements, and the failure each one causes
Mutual assent. An offer, and an acceptance matching it exactly. Change anything in the acceptance and it is a counteroffer, which rejects the original offer and creates a new one. The original cannot then be accepted.
Consideration. Something of value exchanged. It does not have to be money and it does not have to be adequate, only real. A promise to do what you were already legally obliged to do is not consideration.
Capacity. Legal ability to contract. Minors and people adjudicated incompetent lack it. A contract with a minor is generally voidable by the minor, not void, which is a distinction the exam tests directly.
Lawful purpose. A contract to do something illegal is void from the start and no court will enforce any part of it.
Writing. The statute of frauds requires contracts for the sale of an interest in land, and leases longer than a year, to be in writing and signed.
| Term | What it means | Typical cause |
|---|---|---|
| Void | Never was a contract | Illegal purpose, no consideration |
| Voidable | Valid until the protected party rescinds | Minor, fraud, duress, undue influence |
| Unenforceable | Valid but a court will not enforce it | Not in writing, statute of limitations run |
| Executory | Formed, not yet fully performed | Between contract and closing |
| Executed | Fully performed | After closing |
Exam trap
Executed has two meanings and the exam uses both. A contract that has been signed is often called executed in ordinary speech. In contract vocabulary, executed means fully performed. Read which sense the question needs from the rest of the sentence.
Offer and acceptance, in the order the exam asks about
The sequence matters more than any single rule.
- An offer is made. It can be revoked any time before acceptance, even if the offeror promised to hold it open, unless the promise was itself supported by consideration, which makes it an option.
- Acceptance must be communicated. Silence is not acceptance.
- A counteroffer terminates the original offer. The original offeror is now the one deciding.
- Death or incapacity of either party before acceptance terminates the offer.
A common scenario: a buyer offers, the seller counters, the buyer thinks about it, then tries to accept the seller's original asking price. There is nothing left to accept. The counteroffer killed the offer and the asking price was never an offer to begin with, only an invitation to make one.
When a contract breaks
Four remedies, and the exam wants you to match the remedy to the party and the facts.
- Specific performance. A court orders the sale to go through. Available because land is treated as unique, so damages are not an adequate substitute. Usually the buyer's remedy.
- Compensatory damages. Money to put the wronged party where performance would have.
- Liquidated damages. A sum agreed in advance. Earnest money often serves this role, and a seller keeping the deposit is usually keeping liquidated damages.
- Rescission. Unwinding the contract and returning both parties to where they started.
Worth knowing
In Georgia, the earnest money dispute that follows a broken contract is not the broker's to settle. The broker holds the funds and needs a written release, a court order, or interpleader, whatever the contract says about liquidated damages.
Contingencies and conditions
A contingency makes a duty depend on an event. Financing, inspection, appraisal, sale of the buyer's current home.
Two things to know. A contingency benefits a party and can usually be waived by that party. And a contingency that fails does not breach the contract; it releases the parties according to its own terms, which is why a buyer who properly terminates under a financing contingency gets the deposit back rather than forfeiting it.
Assignment transfers the rights under a contract to someone else. Novation replaces one party with another and releases the original party. The difference is release: assignment leaves the assignor on the hook, novation does not.
The glossary entries for counteroffer and specific performance carry the traps each term sets, and the practice sets run contracts questions by topic.
Check yourself
1. A seller lists at $450,000. A buyer offers $430,000. The seller counters at $445,000. The buyer then tries to accept the original $450,000 asking price. What is the result?
Show the answer
Answer: C. A listing price is an invitation to make an offer, not an offer. The seller's counteroffer terminated the buyer's offer, so there was nothing left for the buyer to accept.
2. A 17-year-old signs a contract to buy a house. What is the status of the contract?
Show the answer
Answer: B. Lack of capacity makes a contract voidable by the party the rule protects. The minor may disaffirm; the adult party may not.
3. A buyer sues to force a reluctant seller to complete the sale of a specific property. What remedy is the buyer seeking?
Show the answer
Answer: C. Specific performance orders the actual transfer, and it is available in real estate because each parcel is treated as unique.
4. A buyer assigns their purchase contract to an investor. The seller has not released the buyer. Who remains liable to the seller if the investor fails to close?
Show the answer
Answer: C. Assignment transfers rights but does not release the assignor. Only a novation, which requires the seller's agreement, would release the original buyer.
FAQ
Is an oral agreement to sell land ever enforceable?
The statute of frauds makes it unenforceable as a rule. Courts recognise narrow exceptions, most often partial performance, but on the exam treat a purely oral land sale contract as unenforceable.
What is the difference between void and voidable?
Void means no contract ever existed and nobody can enforce it. Voidable means a valid contract exists that one specific party may cancel. Ask who the rule protects and the answer usually follows.
Does earnest money make a contract binding?
No. Consideration can be the mutual promises themselves. Earnest money shows good faith and often functions as liquidated damages, but a contract can be binding without it.
Who prepares the contract in Georgia?
The parties complete an approved form, and an agent may fill in blanks with terms the parties agreed. Drafting original language is legal work, which the attorney closing rule covers.