Delaware Real Estate Contracts: What's on the Exam

Contract law is heavily tested on the Delaware real estate exam — in both the national and state sections. Here's everything you need to know about real estate contracts for the Delaware PSI exam.

Essential Elements of a Valid Real Estate Contract

Every enforceable real estate contract in Delaware requires:

Offer — A definite proposal to enter into a contract
Acceptance — Unconditional agreement to the exact terms of the offer
Consideration — Something of value (money, promise, service) exchanged between the parties
Legally Competent Parties — Both parties must be 18+ and mentally competent
Lawful Purpose — The contract cannot involve illegal activity
In Writing — Under Delaware's Statute of Frauds, real estate contracts must be written and signed

An oral contract for the sale of real estate is unenforceable in Delaware.

Types of Contracts by Enforceability

Valid contract: All elements present and enforceable by both parties.

Void contract: No legal effect from inception. Example: contract for an illegal purpose.

Voidable contract: Valid unless one party elects to void it. Example: a contract signed under duress or by a minor (the minor may void it; the other party cannot).

Unenforceable contract: Valid between the parties but cannot be enforced in court — typically due to the Statute of Frauds (oral agreement for real property).

The Agreement of Sale (Purchase Agreement)

Delaware's primary residential real estate contract is the Agreement of Sale. The Delaware Association of Realtors provides a standard form. Key provisions include:

Legal description of the property
Purchase price and earnest money deposit amount
Financing terms (amount, type, interest rate)
Closing date and possession date
List of personal property included/excluded
Inspection rights
Contingency clauses

Common Contingencies

Financing Contingency: Buyer may void the contract if unable to obtain financing at specified terms. Buyer must make a good-faith effort to obtain financing.

Home Inspection Contingency: Buyer has the right to inspect and may request repairs or credit — or void the contract if unsatisfied.

Appraisal Contingency: Buyer may renegotiate or exit if the property appraises below purchase price.

Sale of Existing Home Contingency: Buyer's purchase is contingent on selling their current home. Seller may include a right-of-first-refusal or kick-out clause.

Earnest Money in Delaware

Must be deposited into the broker's escrow/trust account per Delaware Commission rules
If the transaction closes successfully, earnest money is applied to the purchase price or closing costs
If the buyer defaults without a valid contingency, the seller may retain the earnest money as liquidated damages
Delaware Commission rules govern the timeline for escrow deposit

Delaware Transfer Tax at Closing

Remember: Delaware's 4% transfer tax is paid at closing. By convention, buyer pays 2% and seller pays 2%. The contract may specify a different allocation, but the 50/50 split is the default expectation.

Breach of Contract

If the buyer defaults: - Seller retains the earnest money (liquidated damages) - Seller may sue for specific performance or actual damages

If the seller defaults: - Buyer may sue for specific performance (force the sale) - Buyer may sue for monetary damages - Buyer may rescind the contract and recover earnest money

Statute of Limitations

Written contracts in Delaware have a 3-year statute of limitations for breach of contract claims. This is shorter than many states — know this for the exam.

For more Delaware contract practice questions, visit [CARealestate.com/states/delaware](https://carealestate.com/states/delaware).