Alabama Contracts
Practice Questions & Answers (2026)
Contract law questions on the Alabama real estate exam test both general contract principles and Alabama-specific transaction requirements. The Alabama Real Estate Commission (AREC) tests how Alabama contract law applies to purchase agreements, counteroffers, contingencies, and earnest money disputes. Pay close attention to offer and acceptance mechanics, how counteroffers extinguish prior offers, and the specific timelines under Alabama law for earnest money handling and contingency resolution. These are areas where candidates who studied nationally often apply the right concept but the wrong AL-specific timeframe or rule.
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Alabama Contracts — Practice Questions & Answers
144 questions on Contracts from the Alabama real estate question bank. First 10 are free — sign up to unlock all 144.
Q1. Under Alabama law, contracts for the purchase of real estate must be in writing to be enforceable. This rule is known as the:
Explanation
The Statute of Frauds requires that contracts for the sale of real property must be in writing and signed by the party to be charged in order to be enforceable in Alabama.
Q2. In Alabama, a listing agreement is a contract between:
Explanation
A listing agreement is an employment contract between the seller (principal) and the real estate broker (agent). It authorizes the broker to find a buyer and specifies compensation.
Q3. A buyer makes an offer to purchase a home. The seller responds by changing the price. This response is a:
Explanation
When the seller changes any term of the offer — including the price — it is a counteroffer. A counteroffer legally rejects the original offer and creates a new offer for the buyer to accept or reject.
Q4. Which of the following is NOT required for a valid real estate contract in Alabama?
Explanation
Notarization is not required for a valid real estate contract in Alabama. A contract requires offer, acceptance, consideration, legal capacity, and a lawful object. Notarization is required for deeds, not contracts.
Q5. In Alabama, a buyer who defaults on a purchase contract may face which remedy at the seller's option?
Explanation
When a buyer defaults in Alabama, the seller may pursue specific performance (court order to complete the purchase), compensatory damages, or retain the earnest money as liquidated damages, depending on the contract terms.
Q6. An Alabama purchase agreement includes a financing contingency. If the buyer cannot obtain financing, the buyer may:
Explanation
A financing contingency protects the buyer. If the buyer cannot obtain financing as specified in the contract, they may cancel the contract and receive a full refund of their earnest money deposit.
Q7. Under Alabama law, an offer to purchase real estate can be withdrawn:
Explanation
An offer may be revoked at any time before the seller has accepted it and communicated that acceptance to the buyer. Once properly accepted, the offer becomes a binding contract.
Q8. Which of the following listing agreements gives the seller the right to sell the property themselves without owing a commission?
Explanation
Under an exclusive agency listing, the broker is the only agent authorized to sell, but if the seller finds their own buyer independently, no commission is owed. Under an exclusive right to sell, commission is owed regardless of who finds the buyer.
Q9. In Alabama, earnest money is held by the broker in a:
Explanation
Earnest money and all client funds must be held in a separate trust or escrow account maintained by the qualifying broker. These funds must never be mixed with operating or personal funds.
Q10. A contract that is missing an essential element such as consideration is:
Explanation
A contract missing an essential element — such as consideration, mutual assent, legal capacity, or lawful object — is void. It has no legal effect and cannot be enforced by either party.
Q11. Time is of the essence in a real estate contract means:
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