Law of Contracts Champions Test Actual Exam 2026/2027 – Complete Solution
with Detailed Rationales | 100% Verified | Pass Guaranteed – A+ Graded
Texas Real Estate Commission (TREC) Contractual Requirements &
Essential Contract Principles
Section A: Contract Fundamentals - Definition, Elements &
Classification (Questions 1–12)
Q1: A real estate sales associate prepares a purchase contract for a buyer using a
TREC-promulgated form but adds several handwritten provisions regarding financing
terms, inspection deadlines, and repair obligations. The sales associate's broker reviews
the document and notes that several of the added provisions contain legal language
that interprets statutory requirements. The broker should advise the sales associate
that:
A. TREC forms allow agents to add any provisions the parties agree upon
B. Adding factual business details is permitted, but drafting contract provisions that
interpret legal requirements constitutes the unlawful practice of law [CORRECT]
C. Only attorneys may use TREC-promulgated forms in real estate transactions
D. The Broker-Lawyer Committee approves all handwritten additions to contracts
Correct Answer: B
Rationale: The unlawful practice of law occurs when a real estate agent drafts contract
provisions that go beyond factual business details and interpret or create legal
obligations under statutory law. TREC forms are drafted by the Broker-Lawyer
Committee specifically to prevent this; agents may only fill in factual business details.
Q2: Which of the following is NOT one of the five essential elements required for a valid
real estate contract under Texas law?
A. Competent parties
B. Offer and acceptance
,C. Witnessed by two disinterested parties [CORRECT]
D. Consideration
Correct Answer: C
Rationale: The five essential elements of a valid real estate contract are competent
parties, offer and acceptance, legal purpose, in writing (statute of frauds), and
consideration. Witness requirements apply to wills and certain other documents, but
real estate contracts do not require witnesses to be valid.
Q3: A buyer signs a contract agreeing to purchase a property for $350,000, and the
seller signs accepting the exact terms. Both parties are legally competent, the purpose
is lawful, the agreement is in writing, and earnest money of $5,000 is provided. This
contract is:
A. Unenforceable because it lacks a notarization
B. Valid and enforceable as all five essential elements are present [CORRECT]
C. Void because earnest money is insufficient consideration
D. Voidable due to the lack of attorney review
Correct Answer: B
Rationale: All five essential elements are present: competent parties, offer and
acceptance, legal purpose, in writing (statute of frauds compliance), and consideration
($5,000 earnest money). Notarization is not required for contract validity, and earnest
money amount is not determinative of sufficient consideration.
Q4: A seller offers to sell a property to Buyer A for 30 days. Buyer A has the exclusive
right to purchase at any time during that period by exercising the option. This
arrangement creates:
A. A bilateral contract obligating both parties immediately
B. A unilateral contract where only the seller is obligated until Buyer A exercises the
option [CORRECT]
C. An invalid contract because only one party is bound
D. A novation of any prior agreements between the parties
Correct Answer: B
Rationale: An option is a unilateral contract where the seller (optionor) is obligated to
sell if the buyer (optionee) chooses to exercise the option, but the buyer is not obligated
to purchase. Only one party is bound to perform, which is the defining characteristic of a
unilateral contract.
, Q5: A contract where both parties promise to perform certain acts—such as the seller
promising to convey title and the buyer promising to pay the purchase price—is
classified as:
A. A unilateral contract
B. A bilateral contract [CORRECT]
C. An option contract
D. A contract for deed
Correct Answer: B
Rationale: A bilateral contract involves mutual promises and obligations—both parties
are bound to perform. In a standard real estate purchase agreement, the seller promises
to convey title and the buyer promises to pay, making it bilateral. Unilateral contracts
bind only one party to performance.
Q6: The statute of frauds requires that real estate contracts be:
A. Recorded in the county clerk's office within 30 days
B. In writing to be enforceable [CORRECT]
C. Approved by the Texas Real Estate Commission before execution
D. Notarized by a Texas-commissioned notary public
Correct Answer: B
Rationale: The statute of frauds requires contracts for the sale of real estate to be in
writing to be enforceable. Recording, TREC approval, and notarization are not statutory
requirements for contract validity, though recording protects against subsequent
purchasers and notarization may be required for recording.
Q7: A buyer and seller orally agree to the sale of a residential property for $200,000. The
buyer pays $10,000 earnest money, but the seller later refuses to convey title. Under
Texas law:
A. The oral contract is enforceable because earnest money was paid
B. The oral contract is unenforceable because it violates the statute of frauds
[CORRECT]
C. The buyer can sue for specific performance because partial performance occurred
D. The seller is liable for fraud but not breach of contract
Correct Answer: B
Rationale: Real estate contracts must be in writing under the statute of frauds to be
enforceable. While partial performance or detrimental reliance may create equitable
with Detailed Rationales | 100% Verified | Pass Guaranteed – A+ Graded
Texas Real Estate Commission (TREC) Contractual Requirements &
Essential Contract Principles
Section A: Contract Fundamentals - Definition, Elements &
Classification (Questions 1–12)
Q1: A real estate sales associate prepares a purchase contract for a buyer using a
TREC-promulgated form but adds several handwritten provisions regarding financing
terms, inspection deadlines, and repair obligations. The sales associate's broker reviews
the document and notes that several of the added provisions contain legal language
that interprets statutory requirements. The broker should advise the sales associate
that:
A. TREC forms allow agents to add any provisions the parties agree upon
B. Adding factual business details is permitted, but drafting contract provisions that
interpret legal requirements constitutes the unlawful practice of law [CORRECT]
C. Only attorneys may use TREC-promulgated forms in real estate transactions
D. The Broker-Lawyer Committee approves all handwritten additions to contracts
Correct Answer: B
Rationale: The unlawful practice of law occurs when a real estate agent drafts contract
provisions that go beyond factual business details and interpret or create legal
obligations under statutory law. TREC forms are drafted by the Broker-Lawyer
Committee specifically to prevent this; agents may only fill in factual business details.
Q2: Which of the following is NOT one of the five essential elements required for a valid
real estate contract under Texas law?
A. Competent parties
B. Offer and acceptance
,C. Witnessed by two disinterested parties [CORRECT]
D. Consideration
Correct Answer: C
Rationale: The five essential elements of a valid real estate contract are competent
parties, offer and acceptance, legal purpose, in writing (statute of frauds), and
consideration. Witness requirements apply to wills and certain other documents, but
real estate contracts do not require witnesses to be valid.
Q3: A buyer signs a contract agreeing to purchase a property for $350,000, and the
seller signs accepting the exact terms. Both parties are legally competent, the purpose
is lawful, the agreement is in writing, and earnest money of $5,000 is provided. This
contract is:
A. Unenforceable because it lacks a notarization
B. Valid and enforceable as all five essential elements are present [CORRECT]
C. Void because earnest money is insufficient consideration
D. Voidable due to the lack of attorney review
Correct Answer: B
Rationale: All five essential elements are present: competent parties, offer and
acceptance, legal purpose, in writing (statute of frauds compliance), and consideration
($5,000 earnest money). Notarization is not required for contract validity, and earnest
money amount is not determinative of sufficient consideration.
Q4: A seller offers to sell a property to Buyer A for 30 days. Buyer A has the exclusive
right to purchase at any time during that period by exercising the option. This
arrangement creates:
A. A bilateral contract obligating both parties immediately
B. A unilateral contract where only the seller is obligated until Buyer A exercises the
option [CORRECT]
C. An invalid contract because only one party is bound
D. A novation of any prior agreements between the parties
Correct Answer: B
Rationale: An option is a unilateral contract where the seller (optionor) is obligated to
sell if the buyer (optionee) chooses to exercise the option, but the buyer is not obligated
to purchase. Only one party is bound to perform, which is the defining characteristic of a
unilateral contract.
, Q5: A contract where both parties promise to perform certain acts—such as the seller
promising to convey title and the buyer promising to pay the purchase price—is
classified as:
A. A unilateral contract
B. A bilateral contract [CORRECT]
C. An option contract
D. A contract for deed
Correct Answer: B
Rationale: A bilateral contract involves mutual promises and obligations—both parties
are bound to perform. In a standard real estate purchase agreement, the seller promises
to convey title and the buyer promises to pay, making it bilateral. Unilateral contracts
bind only one party to performance.
Q6: The statute of frauds requires that real estate contracts be:
A. Recorded in the county clerk's office within 30 days
B. In writing to be enforceable [CORRECT]
C. Approved by the Texas Real Estate Commission before execution
D. Notarized by a Texas-commissioned notary public
Correct Answer: B
Rationale: The statute of frauds requires contracts for the sale of real estate to be in
writing to be enforceable. Recording, TREC approval, and notarization are not statutory
requirements for contract validity, though recording protects against subsequent
purchasers and notarization may be required for recording.
Q7: A buyer and seller orally agree to the sale of a residential property for $200,000. The
buyer pays $10,000 earnest money, but the seller later refuses to convey title. Under
Texas law:
A. The oral contract is enforceable because earnest money was paid
B. The oral contract is unenforceable because it violates the statute of frauds
[CORRECT]
C. The buyer can sue for specific performance because partial performance occurred
D. The seller is liable for fraud but not breach of contract
Correct Answer: B
Rationale: Real estate contracts must be in writing under the statute of frauds to be
enforceable. While partial performance or detrimental reliance may create equitable
