Skip to content
Pass Georgia
Download

National curriculum lesson · Contracts

How Real Estate Contracts End

A contract can end through full performance, mutual agreement, rescission, release, novation, expiration, failure of a valid contingency, breach and remedy, impossibility or other operation of law. Assignment transfers a contractual right and delegation transfers a duty, but neither automatically terminates the contract or releases the original obligor.

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

What is the exam-ready answer?

A contract can end through full performance, mutual agreement, rescission, release, novation, expiration, failure of a valid contingency, breach and remedy, impossibility or other operation of law. Assignment transfers a contractual right and delegation transfers a duty, but neither automatically terminates the contract or releases the original obligor.
Official syllabus mapping for How Real Estate Contracts End
Official syllabus topicHow Real Estate Contracts End
Official PSI areaContracts
Published area weight19% of the 100-question national portion
Exam portionNational salesperson portion
Source editionPSI Georgia Candidate Information Bulletin dated July 1, 2026

The Rule

PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.

The lesson

These ideas work together. On the exam, the wrong answers usually describe a nearby concept, so learn where each one stops.

Performance and expiration

Full performance discharges the parties. An option or contract can also expire by its stated time without exercise or extension.

Agreement-based endings

Mutual rescission cancels the contract. Release gives up a claim or duty. Novation replaces a party or obligation and releases the former one with all required consent.

Contingencies

A condition states an event affecting duty to perform. Properly invoked failure can permit termination, but deadlines, notice, cooperation, and waiver matter.

Operation of law

Illegality, bankruptcy rules, destruction, impossibility, or limitations rules may affect duties, depending on facts and governing law.

Decision rule

Name the termination event and confirm every required notice, consent, deadline, and release.

Georgia-specific distinction

Georgia transaction forms control contingency and termination mechanics. A Georgia licensee should follow the written form, preserve notice evidence, and avoid assuming a party or earnest money is released merely because someone declares the deal over.

Worked example

Scenario. Buyer assigns contractual rights to another person, but Seller never agrees to release Buyer from the duties.

Reason it through. Assignment can transfer rights, but it does not by itself create a novation or erase the original party's liability.

Answer. Buyer may remain obligated unless a valid release or novation occurs.

Common exam traps

  • Treating assignment as novation
  • Missing contingency notice deadlines
  • Assuming breach automatically rescinds
  • Confusing release with performance

Original practice questions with detailed explanations

These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.

Question 1

A buyer assigns a purchase contract to an investor, and the seller agrees in writing to release the original buyer and look only to the investor. What has occurred?

  1. A. Assignment
  2. B. Novation
  3. C. Rescission
  4. D. Delegation
Show answer and explanation →

Answer: B. Novation

Novation substitutes a new party and releases the old one, and it needs the agreement of everyone involved, which the seller's written release supplies. Assignment alone is wrong because assignment transfers rights without releasing the original buyer.

Question 2

A financing contingency requires the buyer to give the seller written notice by May 10 if the loan is denied. The loan is denied May 8, and the buyer sends notice May 14. Why might the buyer's attempt to terminate fail?

  1. A. The notice missed the contract deadline
  2. B. The loan denial was not put in writing
  3. C. A financing contingency cannot end a contract
  4. D. Only the seller may invoke a contingency
Show answer and explanation →

Answer: A. The notice missed the contract deadline

A contingency protects a party only if it is invoked the way the contract requires, including its deadline and notice method. Many candidates assume a failed condition ends the deal by itself, but late notice can leave the buyer bound.

Question 3

Two weeks after signing, a buyer and seller both decide they no longer want the sale and sign an agreement canceling the contract. How did the contract end?

  1. A. Performance
  2. B. Novation
  3. C. Mutual rescission
  4. D. Anticipatory breach
Show answer and explanation →

Answer: C. Mutual rescission

Mutual rescission is an agreement by both parties to cancel the contract. Novation is wrong because it replaces a party or obligation and keeps a deal alive rather than canceling it.

Ready to move on?

You are ready for the next lesson when all of these are true.

  • Explain How Real Estate Contracts End in one clear answer without notes.
  • Separate Performance and expiration from Agreement-based endings using a fresh example.
  • Apply the decision rule to a new fact pattern and name the fact that controls the result.
  • State the Georgia-specific point or explain why the national rule applies unchanged.
  • Answer every practice question and explain the rule each rejected option misapplies.
  • Revisit this topic later in mixed practice without category labels.

Recommended next lesson

Continue with Options, Rights of First Refusal, and Related Rights. Expiration without exercise is one way a right ends, and the next lesson applies that to options, rights of first refusal and rights of first offer, where the exact time and manner of exercise decide whether any purchase contract forms.

Return to the Contracts hub to see every official branch and the complete lesson sequence for this content area.

How Real Estate Contracts End questions

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

Is How Real Estate Contracts End on the Georgia real estate exam?

Yes. It belongs to PSI's Contracts content area, which is 19% of the 100-question national portion. PSI publishes content-area weights, not a guaranteed question count for this individual lesson.

What is the main rule for How Real Estate Contracts End?

Name the termination event and confirm every required notice, consent, deadline, and release.

What Georgia-specific distinction should I remember?

Georgia transaction forms control contingency and termination mechanics. A Georgia licensee should follow the written form, preserve notice evidence, and avoid assuming a party or earnest money is released merely because someone declares the deal over.