ContractsIntermediateCalifornia Exam

Which of the following best describes 'time is of the essence' in a real estate contract?

AThe escrow must close within 30 days by law

BAll contractual deadlines are strictly enforceableCorrect

CThe seller can extend closing at any time

DThe buyer must waive all contingencies immediately

Why All contractual deadlines are strictly enforceable Is Correct

Answer B: All contractual deadlines are strictly enforceable

A 'time is of the essence' clause makes all deadlines in the contract strictly enforceable; failure to meet a deadline can constitute a material breach allowing the other party to cancel.

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

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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Key Terms to Know

Escrow

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

Contingency

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

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

Right of First Refusal

A contractual right giving a party the opportunity to match any offer received before the owner can accept it from a third party.

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Real Estate Contracts Guide

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