ContractsIntermediateDelaware Exam

What is 'failure of consideration' as a defense to enforcing a Delaware real estate contract?

ASimply the outright failure of one contracting party to provide any financial consideration to the other at all

BWhen the consideration that was the basis of the contract fails to materializeCorrect

CThe failure to consider all offers before accepting one

DA defense available only in commercial real estate contracts

Why When the consideration that was the basis of the contract fails to materialize Is Correct

Answer B: When the consideration that was the basis of the contract fails to materialize

Failure of consideration occurs when the promised consideration (the thing of value that induced the contract) fails to materialize — rendering the consideration illusory or non-existent. In real estate, if a seller promises to deliver clear title and cannot (cloud on title), the buyer may have a failure of consideration defense.

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.

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Key Terms to Know

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.

Purchase Agreement

A legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.

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.

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