Where this fits on the exam
| Official syllabus topic | How Real Estate Contracts End |
|---|---|
| Official PSI area | Contracts |
| Published area weight | 19% of the national portion |
| Exam portion | National salesperson portion |
| Source edition | PSI 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
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
Georgia-specific distinction
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 1A 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?
- A. Assignment
- B. Novation
- C. Rescission
- 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.
- A. Incorrect. Assignment alone transfers rights without automatically releasing the original buyer.
- B. Correct. The seller agreed to substitute the investor and release the original buyer, completing a novation.
- C. Incorrect. The sale remains in place with a replacement buyer, rather than being canceled.
- D. Incorrect. Delegating duties alone would not discharge the original buyer's liability.
Question 2A 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?
- A. The notice missed the contract deadline
- B. The loan denial was not put in writing
- C. A financing contingency cannot end a contract
- 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. A failed condition does not necessarily end the deal by itself; late notice can leave the buyer bound.
- A. Correct. May 14 is later than the required May 10 notice deadline.
- B. Incorrect. The facts identify written notice timing as the failure, not an unwritten denial.
- C. Incorrect. A properly invoked financing contingency can permit termination.
- D. Incorrect. The buyer can invoke its contingency if it follows the contract's terms.
Question 3Two 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?
- A. Performance
- B. Novation
- C. Mutual rescission
- 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.
- A. Incorrect. The parties canceled rather than completed their promised performances.
- B. Incorrect. No replacement party or obligation keeps this sale alive.
- C. Correct. Both parties consented to end the agreement.
- D. Incorrect. A unilateral refusal would be repudiation; here both agreed to cancel.
Question 4Before closing or possession, a buyer and seller sign a mutual rescission requiring both to return what they received. The seller holds the buyer's $3,000 deposit; no other payment or performance occurred. Which action matches that agreement?
- A. The seller keeps the deposit automatically as liquidated damages
- B. The deposit is returned and the parties' purchase duties end as agreed
- C. A replacement buyer takes over while the original buyer remains liable
- D. The buyer must complete the purchase before requesting a refund
Show answer and explanation →
Answer: B. The deposit is returned and the parties' purchase duties end as agreed
The stated rescission unwinds this agreement and expressly requires restoration. Returning the $3,000 restores the only transferred value. Do not import a default-forfeiture clause or a new-party arrangement into these facts.
- A. Incorrect. The stated agreement requires return; it does not award the deposit to the seller for default.
- B. Correct. The deposit return and discharge follow the expressly agreed restoration terms.
- C. Incorrect. A substituted buyer concerns assignment or novation, not the agreed unwinding described.
- D. Incorrect. The parties agreed to end the purchase duties before closing, rather than require completion.
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.