PSI Oklahoma Real Estate Complete Practice Test

For a contract to be valid in the context of the sale of real estate, several essential elements must be present. Among these elements are competent parties, legality of purpose, and a written agreement.

Competent parties refer to individuals who are legally able to enter into a contract, meaning they have the legal capacity to understand and be bound by the terms of the agreement. Legality of purpose ensures that the contract’s intent is lawful; for example, it cannot be for illegal activities.

A written agreement is particularly significant in real estate transactions. Many jurisdictions, including Oklahoma, require real estate contracts to be in writing to be enforceable due to statute of frauds requirements.

While earnest money is commonly part of real estate transactions as it demonstrates the buyer's serious intent to purchase, it is not a legal requirement for the contract's validity. Therefore, parties can form a valid contract for the sale of real estate without the necessity of exchanging earnest money.

This distinction highlights how earnest money, while often used, is not a fundamental element required for a valid contract in real estate.