ContractsIntermediateNorth Carolina Exam

Under NC contract law, if one party to a real estate contract is declared incompetent by a court, the contract is:

AVoidable by either party

BVoid — a person declared legally incompetent lacks capacity to contractCorrect

CBinding since it was signed before the incompetency ruling, in most cases

DValid if the other party acts in good faith

Why Void — a person declared legally incompetent lacks capacity to contract Is Correct

Answer B: Void — a person declared legally incompetent lacks capacity to contract

A person who has been adjudicated (declared) legally incompetent by a court lacks legal capacity to contract; any contract entered into after that ruling is void.

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

Purchase Agreement

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

Agency

A legal relationship in which a licensee (agent) acts on behalf of a principal (buyer or seller) in a real estate transaction.

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.

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