Leasing License Practice Exam

Which option is a characteristic of a contract?

1. One party must dominate the other

2. It must involve a clear exchange of value

3. Is typically verbal in nature

4. Can only be executed by an attorney

The correct answer is: It must involve a clear exchange of value

A defining characteristic of a contract is that it must involve a clear exchange of value, often referred to as consideration. This means that both parties involved in the contract must provide something of value to each other, which can take various forms such as money, services, or goods. This reciprocal nature is essential because it creates a binding agreement that is enforceable in a court of law. When value is exchanged, it establishes the intention to enter into a legal relationship, fulfilling one of the fundamental elements required for a valid contract. The other options do not accurately reflect the characteristics of a contract. For instance, domination of one party over another does not represent a hallmark of a contract; rather, contracts are ideally based on mutual consent and equitable agreement. Furthermore, while contracts can be verbal, they are often written to provide clarity and avoid disputes, so they are not typically verbal in nature. Lastly, while it is advisable to have legal representation in certain situations, a contract can be executed by individuals without an attorney present, as many agreements do not require legal counsel to be valid.