Arkansas Contracts
Practice Questions & Answers (2026)
Contract law questions on the Arkansas real estate exam test both general contract principles and Arkansas-specific transaction requirements. The Arkansas Real Estate Commission (AREC) tests how Arkansas 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 Arkansas law for earnest money handling and contingency resolution. These are areas where candidates who studied nationally often apply the right concept but the wrong AR-specific timeframe or rule.
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Arkansas Contracts — Practice Questions & Answers
157 questions on Contracts from the Arkansas real estate question bank. First 10 are free — sign up to unlock all 157.
Q1. Under Arkansas's Statute of Frauds, real estate purchase contracts must be:
Explanation
The Statute of Frauds requires real estate contracts to be in writing and signed by the parties to be enforceable. Oral real estate contracts are not enforceable in Arkansas.
Q2. Which of the following is NOT an essential element of a valid real estate contract?
Explanation
Notarization is not required for a real estate contract to be valid (though it is required for deed recording). The essential elements are: offer and acceptance, consideration, legal capacity, legal purpose, and in Arkansas, written form.
Q3. A buyer submits an offer with an earnest money deposit. The seller makes a counteroffer changing the closing date. The original offer is now:
Explanation
A counteroffer legally rejects the original offer and creates a new offer. The original offer is extinguished; the buyer is now free to accept, reject, or counter the seller's new proposal.
Q4. In a real estate contract, 'time is of the essence' means that:
Explanation
'Time is of the essence' is a contract clause that makes all deadlines strictly enforceable. Missing a deadline constitutes a breach of contract unless the parties agree in writing to an extension.
Q5. A buyer's offer is contingent on obtaining financing. The buyer is unable to qualify for a loan and properly invokes the financing contingency. What happens to the earnest money?
Explanation
When a buyer properly invokes a valid financing contingency because they cannot obtain a loan, the contract is voided and the earnest money is returned to the buyer.
Q6. An option contract in real estate gives the optionee (buyer) the:
Explanation
An option contract grants the optionee the right, but not the obligation, to purchase a property at a predetermined price during the option period. The option consideration paid is typically non-refundable.
Q7. Which clause in a purchase contract allows a seller to continue marketing the property and accept a better offer, giving the original buyer the right to remove a contingency or lose the contract?
Explanation
A kick-out clause (sometimes called a right of first refusal clause) allows the seller to keep marketing the property after accepting a contingent offer. If a better offer comes in, the original buyer must either waive the contingency or forfeit the contract.
Q8. When a buyer defaults on a purchase contract, the seller's remedy of keeping the earnest money as full compensation is known as:
Explanation
Liquidated damages is a pre-agreed remedy in the contract where the seller retains the earnest money as full and final compensation if the buyer defaults, rather than pursuing actual damages through litigation.
Q9. A contract is considered 'executed' when:
Explanation
An executed contract is one where all parties have completely fulfilled all their obligations. Note: a contract can also be referred to as 'executed' when signed, but in real estate, 'fully executed' typically means all terms have been performed.
Q10. A listing agreement that automatically renews unless cancelled is known as a(n):
Explanation
An evergreen or automatic renewal clause causes a contract (such as a listing agreement) to renew automatically at expiration unless one party provides written notice of cancellation within a specified period.
Q11. Which type of listing gives only one broker the right to sell, but allows the owner to sell the property themselves without paying a commission?
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