Tennessee Contracts
Practice Questions & Answers (2026)
Contract law questions on the Tennessee real estate exam test both general contract principles and Tennessee-specific transaction requirements. The Tennessee Real Estate Commission (TREC) tests how Tennessee 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 Tennessee law for earnest money handling and contingency resolution. These are areas where candidates who studied nationally often apply the right concept but the wrong TN-specific timeframe or rule.
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Tennessee Contracts — Practice Questions & Answers
136 questions on Contracts from the Tennessee real estate question bank. First 10 are free — sign up to unlock all 136.
Q1. In a Tennessee real estate purchase contract, earnest money serves as:
Explanation
Earnest money demonstrates the buyer's good faith and becomes part of the consideration for the contract. It is typically applied toward the purchase price or closing costs at settlement.
Q2. A contingency clause in a purchase contract allows a buyer to:
Explanation
A contingency clause makes the contract conditional on a specified event occurring (e.g., loan approval, satisfactory inspection). If the condition is not met, the buyer may terminate the contract and typically recover their earnest money.
Q3. Which of the following best describes the legal concept of 'time is of the essence' in a real estate contract?
Explanation
When a contract includes 'time is of the essence,' all dates and deadlines in the contract are strictly enforced. Failure to meet a deadline by either party may constitute a breach of contract.
Q4. A buyer defaults on a purchase contract that includes a liquidated damages clause. The seller's remedy is typically:
Explanation
A liquidated damages clause specifies in advance the amount of damages (typically the earnest money) that the seller may keep if the buyer defaults. This pre-agreed remedy limits the seller's recovery to that amount.
Q5. An addendum to a real estate contract:
Explanation
An addendum is a written document attached to and incorporated into the original contract. It adds, modifies, or deletes terms and must be signed by all parties to be binding.
Q6. Under what doctrine can a court order a seller to actually complete a real estate sale (rather than pay damages) when the seller refuses to close?
Explanation
Specific performance is an equitable remedy in which a court orders a party to fulfill their contractual obligations. Because every piece of real estate is considered unique, courts may grant specific performance in real estate contract disputes.
Q7. Under Tennessee law, a contract for the sale of real estate must be in writing to be enforceable under the:
Explanation
The Statute of Frauds requires that contracts for the sale of real property be in writing and signed by the party to be charged to be enforceable. Oral real estate contracts are generally unenforceable in Tennessee.
Q8. In a Tennessee real estate contract, 'mutual assent' refers to:
Explanation
Mutual assent (meeting of the minds) means both parties have agreed to the same terms — one party made an offer and the other accepted it without conditions. It is an essential element of a valid contract.
Q9. A counteroffer in a real estate transaction legally:
Explanation
A counteroffer legally rejects the original offer and simultaneously creates a new offer with different terms. The original offeror then becomes the offeree and can accept, reject, or counter again.
Q10. The Tennessee Residential Property Condition Disclosure requires sellers to disclose:
Explanation
Tennessee's Residential Property Condition Disclosure law (TCA 66-5-202) requires sellers to disclose known material defects that affect the value or desirability of the property. The disclosure applies to most residential sales.
Q11. Under the Tennessee Residential Property Condition Disclosure Act, the seller disclosure must be provided to the buyer:
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