CA Agency & contracts

California agency, contracts and conveyancing study cards

Work through California agency duties, contract essentials, and how deeds transfer ownership, then open each answer for the rule and the primary source behind it.

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Study the rule, not a guess.

Identify whose agent is involved in each scenario and when a written agreement is required. The agency relationship and the statute of frauds change the result in most of these cards.

Card 01

A California seller signs an exclusive authorization to sell that lets the broker earn a commission if the listing broker is the procuring cause, including under an exclusive-right-to-sell form. Which role does a salesperson subject to that listing generally owe a buyer?

A fiduciary duty to the buyer as the buy-side customer
A fiduciary duty to the seller under the agency relationship created by the listing
No duty to anyone until an offer is signed
An equal duty to both the seller and the buyer at all times

Reveal answer and explanation

Correct answer: A fiduciary duty to the seller under the agency relationship created by the listing

An exclusive-right-to-sell listing is an agency contract between the seller and the broker. In California, the listing establishes that the broker (and the salespersons working under the broker) act as the seller's agent and owe fiduciary duties to the seller. A buyer is a customer until a separate agency relationship is created. The California DRE materials describe the seller as the principal under a listing agreement for the sale of a single-family residence.

California Department of Real Estate — Agency Relationships in Real Estate Transactions — Seller as principal under a listing agreement for a single-family residence; buyer as customer in the absence of another agency relationship. Source checked 2026-09-05. Review by 2027-03-01.

Card 02

A California home buyer makes a written offer through a broker. Under the statute of frauds, which real estate sales contract generally must be in writing to be enforceable?

Only the purchase agreement signed by both parties
Only the seller's verbal acceptance
An agreement authorizing an agent to purchase real estate for a principal, and contracts for the sale of real property
No real estate agreement needs to be in writing in California

Reveal answer and explanation

Correct answer: An agreement authorizing an agent to purchase real estate for a principal, and contracts for the sale of real property

California's statute of frauds requires agreements authorizing or employing an agent to purchase or sell real estate, and contracts for the sale of real property, to be in writing and signed by the party to be charged. A purely verbal acceptance does not make an otherwise-required written contract enforceable.

California Civil Code — Statute of Frauds — Civil Code § 1624(4): agreements authorizing an agent or broker to purchase or sell real estate; and § 1624(3): contracts for sale of real property. Source checked 2026-09-05. Review by 2027-03-01.

Card 03

After close, a California buyer discovers a substantial defect the seller had been careful to conceal during showings. Which of these opportunities is most directly tied to the state's written transfer disclosure obligations?

The Transfer Disclosure Statement (TDS) requirement for the sale of a single-family residential property
The seller's obligation to repaint and restage the home
The broker's duty to arrange the appraisal
An automatic right to a refund of the commission

Reveal answer and explanation

Correct answer: The Transfer Disclosure Statement (TDS) requirement for the sale of a single-family residential property

For sales of single-family residential real property, California's Transfer Disclosure Statement (TDS) generally obligates the seller to disclose known material defects and conditions, and obligates the selling agent to deliver the statement to the prospective buyer. Concealing a known material defect implicates these disclosure duties.

California Civil Code — Transfer Disclosure Statement — Civil Code § 1102 et seq.: Transfer Disclosure Statement for single-family residential property sales. Source checked 2026-09-05. Review by 2027-03-01.

Card 04

A California seller signs and delivers a grant deed conveying a home to a buyer, but the deed is not recorded. Which statement about the transfer is most accurate at that moment?

The transfer is void because the deed was not recorded
Recording the deed is what transfers title; delivery alone is insufficient
Delivery of a validly executed deed generally transfers title, while recording protects priority against subsequent claimants
Only a court order can transfer title in California

Reveal answer and explanation

Correct answer: Delivery of a validly executed deed generally transfers title, while recording protects priority against subsequent claimants

In California a deed transfers title upon delivery with the intent to convey; recording is not generally what transfers title. Recording gives constructive notice and protects the grantee's priority against later claimants. This is why an unrecorded deed can still complete a transfer but leaves the grantee exposed to conflicting claims.

California Civil Code — Transfer of real property by deed — Civil Code § 1055: a grant of an estate in real property passes title upon delivery of the deed with intent to convey; recording affects notice and priority. Source checked 2026-09-05. Review by 2027-03-01.

Card 05

Under California Civil Code Section 2079.17, when a real estate broker represents both the buyer and the seller in the same transaction, what statutory disclosure and consent requirement must be satisfied?

The broker must obtain written consent from both parties prior to or concurrently with execution of the purchase agreement
The broker may proceed with verbal consent provided an email confirmation is sent within 30 days
Dual agency is strictly illegal under California law under all circumstances
The broker needs consent only from the seller since the seller pays the commission

Reveal answer and explanation

Correct answer: The broker must obtain written consent from both parties prior to or concurrently with execution of the purchase agreement

California Civil Code § 2079.17 mandates that a dual agent must obtain the informed written consent of both the buyer and the seller before or concurrently with the execution of the contract. Dual agency requires heightened fiduciary disclosure of all material facts except the confidential price limits of either party.

California Civil Code — Dual Agency Disclosure and Consent — Civil Code § 2079.17: Dual agency requires written disclosure and consent of both principals. Source checked 2026-09-05. Review by 2027-03-01.

Card 06

Which of the following events will NOT automatically terminate an agency relationship established between a California broker and a principal under a listing agreement?

The death or mental incapacity of the broker or the principal
The expiration of the definite termination date stated in the listing agreement
The death of the salesperson who signed the listing agreement on behalf of the employing broker
Destruction of the subject real property by a wildfire

Reveal answer and explanation

Correct answer: The death of the salesperson who signed the listing agreement on behalf of the employing broker

A listing agreement is a personal service contract between the principal (seller) and the broker (the brokerage). The salesperson is merely an agent of the broker. Therefore, the death of the salesperson does not terminate the listing; the broker remains bound and can reassign another salesperson. In contrast, the death of the broker or the principal terminates the agency.

California Department of Real Estate — Reference Book: Agency Termination — Chapter 10: Termination of Agency by Operation of Law vs. Acts of Parties. Source checked 2026-09-05. Review by 2027-03-01.

Card 07

A seller signs an Open Listing with Broker A, Broker B, and Broker C. Broker B introduces a prospective buyer who inspects the property, but two weeks later the buyer submits an offer directly through Broker A, who successfully closes escrow. Who is legally entitled to the commission in California?

Broker A only, because Broker A was the procuring cause that secured the accepted contract and closed the sale
Broker B only, because Broker B was the first licensee to introduce the buyer to the property
All three brokers must split the commission equally
The seller is exempt from paying any commission because multiple brokers were involved

Reveal answer and explanation

Correct answer: Broker A only, because Broker A was the procuring cause that secured the accepted contract and closed the sale

Under a non-exclusive Open Listing in California, the commission is earned exclusively by the broker who is the 'procuring cause'—the unbroken chain of events that leads to a binding contract and completed sale. Merely introducing a buyer does not guarantee procuring cause if another broker brings the deal to completion.

California DRE — Procuring Cause Guidelines — Open listing commission entitlement requires establishing procuring cause. Source checked 2026-09-05. Review by 2027-03-01.

Card 08

In the standard California Association of Realtors (CAR) Residential Listing Agreement, what is the legal purpose and function of the 'Safety Clause' (Broker Protection Clause)?

It protects the seller against any personal liability from slip-and-fall injuries during open houses
It entitles the broker to a commission if, within a specified number of days after the listing expires, the property sells to a buyer whom the broker registered in writing with the seller
It requires the buyer to purchase homeowner hazard insurance prior to loan approval
It allows the broker to unilaterally extend the listing period without the seller's written consent

Reveal answer and explanation

Correct answer: It entitles the broker to a commission if, within a specified number of days after the listing expires, the property sells to a buyer whom the broker registered in writing with the seller

The Safety Clause (Broker Protection Clause) in California listing agreements protects the listing broker from sellers who wait until the listing agreement expires to contract directly with a buyer introduced by the broker. To enforce the clause, the broker must provide the seller with a written list of prospective buyers before the listing termination date.

California DRE — Listing Contracts and Safety Clauses — Chapter 10: Exclusive Right to Sell Agreement Provisions and Safety Clauses. Source checked 2026-09-05. Review by 2027-03-01.

Card 09

Under the California Association of Realtors (CAR) standard Residential Purchase Agreement (RPA), how do contractual contingencies (e.g., loan, appraisal, inspection) operate upon the expiration of the contingency deadline?

Contingencies are automatically waived or removed when the stated calendar days expire
Contingencies remain in full effect until the buyer actively removes them in writing using a Contingency Removal form
The purchase agreement becomes immediately void if contingencies are not removed on day 17
The escrow holder has unilateral authority to waive contingencies on behalf of the parties

Reveal answer and explanation

Correct answer: Contingencies remain in full effect until the buyer actively removes them in writing using a Contingency Removal form

California standard purchase agreements follow the 'Active Method' of contingency removal. Contingencies do NOT passively expire or automatically disappear; they remain in force until the buyer formally executes and delivers a written Contingency Removal (CR) form. If the buyer fails to remove them, the seller must deliver a Notice to Buyer to Perform before canceling.

California Association of Realtors — RPA Contingency Framework — CAR RPA Clause 8: Active written contingency removal requirements. Source checked 2026-09-05. Review by 2027-03-01.

Card 10

Under California Civil Code Section 1675, what is the maximum statutory cap on liquidated damages that a seller may retain if a buyer breaches a contract to purchase an owner-occupied residential property containing 1 to 4 dwelling units?

A maximum of 1% of the purchase price
A maximum of 3% of the purchase price, provided both parties initialed the liquidated damages clause
A maximum of 10% of the purchase price
The seller may keep the entire earnest money deposit regardless of amount

Reveal answer and explanation

Correct answer: A maximum of 3% of the purchase price, provided both parties initialed the liquidated damages clause

California Civil Code § 1675 establishes that for owner-occupied residential properties of 1 to 4 units, liquidated damages for buyer default are presumed valid to the extent they do not exceed 3% of the purchase price, provided the liquidated damages provision is separately signed or initialed by both parties in 10-point bold type.

California Civil Code — Liquidated Damages in Real Property Sales — Civil Code § 1675: 3% statutory safe harbor for liquidated damages on residential 1-4 units. Source checked 2026-09-05. Review by 2027-03-01.

Card 11

A California home purchase agreement contains the clause 'Time is of the essence.' What is the legal effect of this provision if a party fails to tender performance by the contractually specified closing date?

The party in delay is granted an automatic 30-day statutory grace period under California law
Punctual performance by the exact specified dates is an essential condition, and unexcused failure to perform on time constitutes a material breach of contract
The clause is an unenforceable formality with no legal weight in California courts
The escrow holder must immediately confiscate the buyer's earnest money deposit

Reveal answer and explanation

Correct answer: Punctual performance by the exact specified dates is an essential condition, and unexcused failure to perform on time constitutes a material breach of contract

In California contract law, a 'Time is of the essence' clause makes strict adherence to all contractual deadlines and closing dates a material term of the agreement. Failure to perform on or before the specified date constitutes a breach, discharging the non-breaching party from their obligation to perform.

California Civil Code — Performance of Contract Obligations — Civil Code § 1492: Time is of the essence makes timely performance a condition precedent. Source checked 2026-09-05. Review by 2027-03-01.

Card 12

A seller refuses to complete the conveyance of an oceanfront home after executing a fully binding purchase agreement. Why is a lawsuit for 'Specific Performance' an especially effective remedy for the buyer under California law?

Every parcel of real property is legally presumed to be unique under California law, meaning monetary damages are deemed inadequate to compensate the buyer
Specific performance guarantees that the seller will be sentenced to state prison for breach of contract
Specific performance allows the buyer to seize all personal property inside the home without paying consideration
The buyer can force specific performance even if the buyer never had financing or funds to perform

Reveal answer and explanation

Correct answer: Every parcel of real property is legally presumed to be unique under California law, meaning monetary damages are deemed inadequate to compensate the buyer

Under California Civil Code § 3387, there is a statutory presumption that monetary damages do not adequately compensate for the breach of an agreement to transfer real property, because real estate is intrinsically unique. Consequently, an equitable action for specific performance compels the seller to deliver the deed as promised.

California Civil Code — Presumption of Inadequacy of Damages for Real Property — Civil Code § 3387: Presumption that real property uniqueness justifies specific performance. Source checked 2026-09-05. Review by 2027-03-01.

Card 13

How does a 'Novation' differ from an 'Assignment' of a real estate contract under California law?

Novation transfers contractual duties while leaving the original party secondarily liable, whereas assignment cancels the contract
Novation completely substitutes a new party or new contract, extinguishing the original contract and releasing the outgoing party from all future liability
Novation applies only to leases, whereas assignment applies only to grant deeds
There is no legal difference between novation and assignment in California

Reveal answer and explanation

Correct answer: Novation completely substitutes a new party or new contract, extinguishing the original contract and releasing the outgoing party from all future liability

A novation is the substitution of a new obligation for an existing one (Civil Code § 1530), or the substitution of a new debtor or creditor, which completely extinguishes the original contract and releases the original party. In contrast, an assignment transfers rights, but the assignor generally remains secondarily liable unless expressly released.

California Civil Code — Novation Defined — Civil Code §§ 1530-1532: Extinguishment of existing obligation through substitution of parties. Source checked 2026-09-05. Review by 2027-03-01.

Card 14

What distinguishes an estate in 'Fee Simple Absolute' from an estate in 'Fee Simple Defeasible' (Condition Subsequent) in California real property law?

Fee simple absolute expires upon the death of the owner, whereas defeasible is perpetual
Fee simple absolute is the highest, most complete form of ownership with no restrictions on inheritance or duration; fee simple defeasible can be terminated if a specified condition or restriction is violated
Fee simple defeasible cannot be conveyed by grant deed
Fee simple absolute applies only to commercial industrial parks

Reveal answer and explanation

Correct answer: Fee simple absolute is the highest, most complete form of ownership with no restrictions on inheritance or duration; fee simple defeasible can be terminated if a specified condition or restriction is violated

Fee Simple Absolute is the maximum possible estate in real property, lasting indefinitely with unrestricted rights of disposition and inheritance. Fee Simple Defeasible carries a condition (e.g. 'provided property is never used for alcohol sales'); if the condition is violated, the grantor or heirs hold a right of re-entry or automatic reversion.

California Civil Code — Estates in Real Property — Civil Code § 761: Classification of estates in real property: fee simple absolute vs defeasible. Source checked 2026-09-05. Review by 2027-03-01.

Card 15

Under California Civil Code Section 683, which four unities must be present simultaneously to create a valid 'Joint Tenancy'?

Time, Title, Interest, and Possession (the 'TTIP' unities)
Taxation, Trust, Inheritance, and Probate
Tenancy, Transfer, Indemnity, and Property
Time, Terrain, Improvement, and Price

Reveal answer and explanation

Correct answer: Time, Title, Interest, and Possession (the 'TTIP' unities)

To create a joint tenancy in California, the four unities must exist: (1) Unity of Time (interests vest at the same moment), (2) Unity of Title (acquired by the same instrument), (3) Unity of Interest (identical and equal ownership shares), and (4) Unity of Possession (undivided right to occupy the whole). Its hallmark feature is the Right of Survivorship.

California Civil Code — Joint Tenancy Defined — Civil Code § 683: Joint tenancy creation requirements and four unities. Source checked 2026-09-05. Review by 2027-03-01.

Card 16

Two business partners acquire an office building as 'Tenants in Common'. One partner dies leaving a valid will that devises all assets to their adult child. Who now owns the deceased partner's ownership share in the property?

The surviving business partner automatically inherits the deceased partner's share by right of survivorship
The deceased partner's share passes to their adult child under the will, because tenancy in common carries NO right of survivorship
The property automatically escheats to the State of California
The property must immediately be sold at public auction by the California DRE

Reveal answer and explanation

Correct answer: The deceased partner's share passes to their adult child under the will, because tenancy in common carries NO right of survivorship

Tenancy in Common is characterized by separate, undivided interests without the right of survivorship. When a tenant in common dies, their interest passes to their designated heirs through probate or will (or intestate succession), not to the surviving co-tenants.

California Civil Code — Tenancy in Common — Civil Code § 685: Tenancy in common ownership and absence of survivorship. Source checked 2026-09-05. Review by 2027-03-01.

Card 17

Under California Civil Code Section 682.1, married couples may hold title as 'Community Property with Right of Survivorship'. What significant dual advantage does this vesting form provide upon the death of one spouse?

It bypasses probate like a joint tenancy, while securing a 100% full step-up in income tax cost basis across the entire property under IRC Section 1014
It eliminates all local county property taxes permanently under Proposition 13
It shields the property completely from all mortgage lender foreclosure actions
It allows one spouse to sell the entire property without the other spouse's consent

Reveal answer and explanation

Correct answer: It bypasses probate like a joint tenancy, while securing a 100% full step-up in income tax cost basis across the entire property under IRC Section 1014

Community Property with Right of Survivorship (Civil Code § 682.1) combines the probate avoidance of joint tenancy (title passes immediately to surviving spouse upon death without court proceedings) with the tax advantages of community property (both halves receive a complete step-up in basis to fair market value under federal tax law).

California Civil Code — Community Property with Right of Survivorship — Civil Code § 682.1: Community property with right of survivorship combines probate avoidance with tax step-up. Source checked 2026-09-05. Review by 2027-03-01.

Card 18

What is the legal difference between an 'Easement Appurtenant' and an 'Easement in Gross' in California real estate law?

An easement appurtenant attaches to and runs with the land for the benefit of a dominant tenement; an easement in gross is a personal or commercial interest that attaches to an individual or entity with no dominant parcel
An easement appurtenant is always verbal, whereas an easement in gross must be recorded
Easements in gross cannot be granted to public utility corporations
Easements appurtenant automatically expire after 10 years

Reveal answer and explanation

Correct answer: An easement appurtenant attaches to and runs with the land for the benefit of a dominant tenement; an easement in gross is a personal or commercial interest that attaches to an individual or entity with no dominant parcel

An easement appurtenant requires two parcels: a dominant tenement (the benefited land) and a servient tenement (the encumbered land). It automatically transfers with title to the land. An easement in gross (such as an electrical utility line or pipeline) has a servient tenement but no dominant parcel, belonging to a company or individual personally.

California Civil Code — Servitudes and Easements — Civil Code §§ 801-802: Servitudes attached to land vs. servitudes not attached to land. Source checked 2026-09-05. Review by 2027-03-01.

Card 19

To establish an 'Easement by Prescription' across a neighbor's driveway in California, what statutory conditions must the claimant prove under the California Code of Civil Procedure?

Continuous, open, notorious, hostile (without permission) use for at least 5 consecutive years
Occasional weekend use for at least 20 years with written neighbor consent
Payment of all property taxes on the neighbor's property for at least 1 year
A court order signed by the county surveyor prior to first use

Reveal answer and explanation

Correct answer: Continuous, open, notorious, hostile (without permission) use for at least 5 consecutive years

Under California law, acquiring a prescriptive easement requires continuous, uninterrupted use for 5 years that is open and notorious, adverse and hostile to the owner, and under claim of right. Unlike adverse possession (which grants full fee title), a prescriptive easement grants only a right of use, so payment of property taxes is not required.

California Code of Civil Procedure — Prescription and Adverse Use — CCP § 321 & Civil Code § 1007: 5-year statutory period for prescriptive rights. Source checked 2026-09-05. Review by 2027-03-01.

Card 20

In California, what two statutory warranties are implied by law when a seller executes and delivers a 'Grant Deed' under Civil Code Section 1113?

(1) The grantor has not previously conveyed the estate to anyone else, and (2) the estate is free from encumbrances done, made, or suffered by the grantor
(1) The property will never suffer physical flood damage, and (2) the foundation is defect-free
(1) The grantor guarantees the market value will rise, and (2) all neighborhood property taxes are paid forever
Grant deeds contain zero implied covenants in California; only quitclaim deeds carry warranties

Reveal answer and explanation

Correct answer: (1) The grantor has not previously conveyed the estate to anyone else, and (2) the estate is free from encumbrances done, made, or suffered by the grantor

California Civil Code § 1113 establishes that using the word 'grant' in a conveyance deed implies two statutory covenants: (1) that the grantor has not previously conveyed the same estate or any right therein to another person, and (2) that the estate is free from any encumbrances made by the grantor or any person claiming under the grantor.

California Civil Code — Implied Covenants in Grant Deeds — Civil Code § 1113: Implied warranties of prior non-conveyance and freedom from grantor encumbrances. Source checked 2026-09-05. Review by 2027-03-01.

Card 21

A seller executes a 'Quitclaim Deed' in favor of a buyer. What interest in the real property does the quitclaim deed convey?

It conveys whatever present right, title, or interest the grantor holds at that moment, without any covenants or warranties of title
It conveys fee simple title with full lifetime title insurance protection
It conveys all future after-acquired title that the grantor may obtain in the next 10 years
Quitclaim deeds are illegal in California real property transactions

Reveal answer and explanation

Correct answer: It conveys whatever present right, title, or interest the grantor holds at that moment, without any covenants or warranties of title

A quitclaim deed transfers only the present interest of the grantor, if any. It contains no implied or express warranties and does not convey after-acquired title. In California, quitclaim deeds are commonly used to clear clouds on title, terminate easements, or relinquish spousal community claims during divorce.

California Department of Real Estate — Reference Book: Deeds and Conveyances — Chapter 5: Legal Effects of Quitclaim Deeds vs. Grant Deeds. Source checked 2026-09-05. Review by 2027-03-01.

Card 22

How are Escrow instructions handled in California residential sales, and what role does the escrow officer perform?

Escrow functions as a neutral dual agent bound by bilateral instructions from buyer and seller to hold funds and documents until closing conditions are met
The escrow officer acts as the exclusive advocate for the buyer to negotiate loan rate concessions
Escrow instructions can be altered verbally by either party at any time without mutual written consent
Real estate brokers are legally barred from ever acting as escrow holders under any licensing exemption

Reveal answer and explanation

Correct answer: Escrow functions as a neutral dual agent bound by bilateral instructions from buyer and seller to hold funds and documents until closing conditions are met

In California, an escrow holder is a neutral dual agent for both buyer and seller. Escrow instructions (unilateral in Southern CA, bilateral in Northern CA) govern the closing process. The escrow officer has a fiduciary duty to carry out the mutual instructions strictly and cannot favor either principal. Under California Financial Code, brokers can conduct escrows for their own transactions.

California Department of Financial Protection and Innovation — Escrow Law — California Financial Code Division 6: Neutral dual agency of escrow holders. Source checked 2026-09-05. Review by 2027-03-01.

Card 23

What is the primary legal distinction between the government exercise of 'Police Power' and 'Eminent Domain' over private real property in California?

Police power regulates use for public health, safety, and welfare without compensation; eminent domain takes private property for public use and requires payment of just compensation under the 5th Amendment
Police power requires payment of fair market value, whereas eminent domain does not
Eminent domain applies only to agricultural land, while police power applies solely to commercial buildings
The State of California cannot exercise eminent domain without unanimous city council consent

Reveal answer and explanation

Correct answer: Police power regulates use for public health, safety, and welfare without compensation; eminent domain takes private property for public use and requires payment of just compensation under the 5th Amendment

Police power (zoning, building codes, environmental restrictions) regulates property use for public welfare without requiring compensation to owners. Eminent domain is the sovereign right to condemn and take private property for public use (highways, schools, transit), which mandates the payment of 'just compensation' (fair market value).

California Code of Civil Procedure — Eminent Domain Law — CCP § 1230.010: Eminent domain taking for public use requiring just compensation. Source checked 2026-09-05. Review by 2027-03-01.

Card 24

Under California Probate Code, if an individual dies intestate (without a will) and with no surviving spouse, children, or any identifiable blood relatives or heirs, what happens to their real property?

It passes to the county real estate board for auction
It reverts (escheats) to the State of California through the legal process of Escheat
The adjacent neighboring property owner automatically assumes title
The property is placed in trust for 100 years before any transfer can occur

Reveal answer and explanation

Correct answer: It reverts (escheats) to the State of California through the legal process of Escheat

Under California Probate Code § 6800, if an owner dies intestate without leaving a surviving spouse or any heirs entitled to take the estate under statutory succession rules, the decedent's real and personal property escheats to the State of California.

California Probate Code — Escheat of Property — Probate Code § 6800: Intestate estate without heirs escheats to the State. Source checked 2026-09-05. Review by 2027-03-01.

Card 25

What is the legal effect of an 'Option' contract on real property entered into between a seller (optionor) and a prospective buyer (optionee) in California?

It is a bilateral contract that legally compels both parties to complete the sale on a specified date
It is a unilateral contract binding the optionor to sell at a set price for a set timeframe, while the optionee has the choice to exercise or let it expire without obligation
Options are void unless the optionee pays 20% of the purchase price upfront
An option automatically revokes all prior grant deeds recorded on the parcel

Reveal answer and explanation

Correct answer: It is a unilateral contract binding the optionor to sell at a set price for a set timeframe, while the optionee has the choice to exercise or let it expire without obligation

An option is a unilateral agreement supported by consideration where the seller (optionor) promises to keep an offer open for a fixed period at a set price. The optionor is bound to convey if the option is exercised, but the optionee is under no legal obligation to purchase.

California Department of Real Estate — Reference Book: Option Contracts — Chapter 9: Characteristics and Enforceability of Real Estate Option Contracts. Source checked 2026-09-05. Review by 2027-03-01.