Michigan Contracts
Practice Questions & Answers (2026)
Contract law questions on the Michigan real estate exam test both general contract principles and Michigan-specific transaction requirements. The Michigan Department of Licensing and Regulatory Affairs (LARA) tests how Michigan 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 Michigan law for earnest money handling and contingency resolution. These are areas where candidates who studied nationally often apply the right concept but the wrong MI-specific timeframe or rule.
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Michigan Contracts — Practice Questions & Answers
149 questions on Contracts from the Michigan real estate question bank. First 10 are free — sign up to unlock all 149.
Q1. A Michigan purchase agreement becomes a binding contract when:
Explanation
A contract is formed when there is a valid offer and acceptance, and the acceptance is communicated back to the offeror. Signature alone, without communication of acceptance, does not complete contract formation.
Q2. In Michigan, an exclusive right-to-sell listing agreement means:
Explanation
Under an exclusive right-to-sell listing, the broker is entitled to a commission if the property sells during the listing period, regardless of who finds the buyer — including the seller themselves.
Q3. A counteroffer in Michigan terminates the original offer and:
Explanation
A counteroffer rejects the original offer and creates a new offer with modified terms. The original offeror now becomes the offeree and may accept, reject, or counter the new offer.
Q4. The concept of 'time is of the essence' in a Michigan real estate contract means:
Explanation
A 'time is of the essence' clause means that all dates and deadlines in the contract are strict and material. Failure to perform by the specified date constitutes a breach of contract.
Q5. If a buyer defaults on a Michigan purchase agreement and the contract contains a liquidated damages clause, the seller:
Explanation
A liquidated damages clause pre-determines the remedy for default. When the buyer defaults, the seller's recovery is limited to the agreed-upon liquidated damages, typically the earnest money deposit.
Q6. An option contract in Michigan gives the optionee the:
Explanation
An option contract gives the optionee the right — but not the obligation — to purchase the property at a specified price within a specified period. The optionor is bound but the optionee has flexibility.
Q7. Under Michigan law, real estate purchase agreements must be:
Explanation
The Statute of Frauds requires that real estate contracts be in writing to be legally enforceable. Oral real estate contracts are generally unenforceable in Michigan.
Q8. In Michigan, a real estate contract signed by a minor is:
Explanation
Contracts signed by minors are voidable, not void. The minor can disaffirm the contract upon reaching the age of majority. However, the other party cannot disaffirm based solely on the minor's age.
Q9. What is an 'as-is' clause in a Michigan purchase agreement?
Explanation
An 'as-is' clause means the buyer agrees to accept the property in its current condition. However, it does not eliminate the seller's obligation to disclose known defects or protect the buyer from fraudulent misrepresentation.
Q10. In Michigan, earnest money deposited by a buyer is typically held by:
Explanation
In Michigan, earnest money is typically held in the listing broker's escrow or trust account until the transaction closes or the deposit is otherwise disbursed per the contract terms.
Q11. A Michigan purchase agreement contingent on the buyer's financing means:
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