Certified Residential Appraiser Practice Exam

Which of the following best describes a valid contract?

1. It is no longer enforceable on any parties.

2. It lacks essential elements of a contract.

3. It is binding and enforceable with all valid elements present.

4. It is only enforceable in a specific jurisdiction.

The correct answer is: It is binding and enforceable with all valid elements present.

A valid contract is one that meets all the essential elements required for enforceability under the law, thus making it binding on the parties involved. These essential elements typically include an offer, acceptance, consideration, mutual consent, and the legal capacity of the parties to contract. When all these elements are present, the contract is recognized as valid in court, meaning that the parties can be held to its terms. This reflects the foundational principle of contract law, which ensures that agreements entered into by parties can be executed and upheld in legal settings. The phrasing of this option clearly encompasses the idea of a contract being both binding and enforceable, which is essential for its function in legal and business environments. The other options do not reflect a valid contract correctly: the option stating that it is no longer enforceable suggests it has lost its validity, while the notion of lacking essential elements directly contradicts the concept of a valid contract. Lastly, the idea that a contract is only enforceable in a specific jurisdiction limits its application but does not inherently define its validity, as most contracts can be valid across jurisdictions if they meet the necessary legal criteria.