Question:
You are trying to explain to a new salesperson in your office the purpose of a deposit when negotiating the terms of the Agreement of Purchase and Sale.
Which of the following statements best describes the purpose of a deposit in the contracting process?
A ) If there is no deposit, there is no consideration and the contract is not binding.
B ) If there is no deposit, the irrevocable clause in the Agreement cannot be enforced.
C ) A large deposit guarantees payment of commission.
D ) According to contract law, the deposit is consideration and consideration is an important element of a contract.
Suggested Correct Answer: D
How come the deposit is consideration, it is a part of consideration and deposit can be zero as well. Explanation?
Answer:
This is somewhat problematic. The deposit is NOT Consideration. There are a good deal of misconceptions about this.
Also,
- is incorrect,
- is incorrect,
- is incorrect,
- is incorrect.
I wouldn’t worry about it too much. I’m not sure where that question came from, but whoever drafted it was in error.
Brian Madigan LL.B., Broker