National Real Estate Exam (PSI)ContractsEasy
Which of the following best describes 'consideration' as an essential element of a valid real estate contract?
- ASomething of legal value exchanged between the parties
- BThe buyer's promise to obtain financing before closing
- CA notarized signature confirming the agreement
- DThe seller's disclosure of property defects
Show answer & explanationAnswer & explanation
Correct answer: A. Something of legal value exchanged between the parties
Consideration is the legal value—money, promises, or services—exchanged between contracting parties that makes the agreement binding. Without consideration, an agreement is generally unenforceable as a contract.
Why the other options are wrong
- B. A financing contingency is a specific term, not the general concept of consideration.
- C. Notarization is not required for contract validity; it only relates to recording, not consideration.
- D. Disclosure relates to seller obligations, not the exchange of value required for a contract.
Consideration
Something of legal value—money, promise, or performance—given by each party in exchange for the other's promise, essential to forming a valid contract.
- Can be money, a promise, or performance of an act
- Must have legal value, not necessarily equal value
- Contracts without consideration are generally unenforceable
Memory trick: No value exchanged, no valid deal.