ContractsIntermediateArizona Exam

A contingency in a real estate contract serves to:

AMake the contract binding immediately regardless of future events
BSuspend the parties' obligations until a specified condition is met or waivedCorrect
CRequire the buyer to forfeit earnest money if they cancel
DCreate a sublease of the property during escrow

Why Suspend the parties' obligations until a specified condition is met or waived Is Correct

Answer B: Suspend the parties' obligations until a specified condition is met or waived

A contingency is a condition that must be satisfied for the contract to become fully binding. Until the condition is met or waived, neither party is obligated to close escrow.

Exam Tip: Contracts

Contract questions frequently test the essential elements required for a valid contract. Remember: competent parties, mutual consent, lawful object, and sufficient consideration. Watch for void vs. voidable distinctions.

Key Contracts Terms in This Question

Earnest Money

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

Contingency

A condition in a purchase contract that must be satisfied before the sale can proceed to closing.

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

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