California Contracts
Practice Questions & Answers (2026)
Contract law questions on the California real estate exam test both general contract principles and California-specific transaction requirements. The California Department of Real Estate (DRE) tests how California 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 California law for earnest money handling and contingency resolution. These are areas where candidates who studied nationally often apply the right concept but the wrong CA-specific timeframe or rule.
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California Contracts — Practice Questions & Answers
163 questions on Contracts from the California real estate question bank. First 10 are free — sign up to unlock all 163.
Q1. Which of the following is NOT a required element of a valid contract?
Explanation
The required elements of a valid contract are: offer and acceptance, consideration, legal purpose, competent parties, and in writing (for real estate). Notarization is not required for a contract to be valid.
Q2. What is 'consideration' in a real estate contract?
Explanation
Consideration is something of value given by each party to a contract. In a real estate sale, the consideration is typically the purchase price from the buyer and the property title from the seller.
Q3. A contract that is 'voidable' means:
Explanation
A voidable contract is valid and enforceable unless one party chooses to disaffirm it. Common examples include contracts signed by minors or under duress.
Q4. In California, real estate contracts must be in writing to be enforceable under the:
Explanation
The Statute of Frauds requires real estate contracts to be in writing to be legally enforceable. Verbal real estate agreements are generally not enforceable in California.
Q5. What happens when a buyer makes a counteroffer to the seller's counteroffer?
Explanation
Each counteroffer voids all previous offers. The most recent counteroffer is the only one on the table until accepted, rejected, or countered again.
Q6. What is 'specific performance' as a contract remedy?
Explanation
Specific performance is a court-ordered remedy requiring the breaching party to carry out their contractual obligations. It is commonly sought in real estate because each property is unique.
Q7. An 'option contract' in real estate gives the buyer:
Explanation
An option contract gives the buyer (optionee) the right — but not the obligation — to purchase a property at a predetermined price within a specified time period, in exchange for option consideration paid to the seller.
Q8. What does 'time is of the essence' mean in a real estate contract?
Explanation
'Time is of the essence' means all deadlines in the contract are strictly binding. Missing a deadline — even by one day — can constitute a material breach of contract.
Q9. A contingency in a real estate contract:
Explanation
A contingency is a condition that must be satisfied for the contract to proceed. Common contingencies include financing, inspection, and appraisal. If a contingency is not met, the buyer can typically cancel.
Q10. What is liquidated damages in a California residential purchase agreement?
Explanation
In California residential contracts, liquidated damages clauses (if initialed by both parties) limit the seller's remedy to keeping the deposit if the buyer defaults, instead of suing for full damages.
Q11. What is novation in contract law?
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