PSI Virginia Real Estate Practice Exam

What best describes a terminated contract?

1. It has been canceled with no liabilities

2. It recognizes the agreement with ongoing liabilities

3. It is accepted by all parties without any implications

4. It alters the terms without ending the contract

The correct answer is: It recognizes the agreement with ongoing liabilities

A terminated contract is best described as an agreement that has been concluded, where the parties involved recognize that the contract is no longer in effect; however, it may still carry ongoing liabilities depending on the situation. This means that while the contractual obligations to perform under the agreement have ended, any responsibilities related to actions taken prior to termination—such as payment separations or damages that arose during the contract period—may still be enforceable. Other choices do not accurately capture the essence of a terminated contract. The notion of cancellation without liabilities generally applies to situations where an agreement is rescinded without any consequences, which does not reflect all contractual contexts. The idea of acceptance by all parties without implications implies a mutual agreement to end the contract with no further obligations, which could be misleading. Lastly, altering terms without ending the contract describes a modification rather than termination, as a terminated contract finishes the relationship established by the original agreement.