Which statement best describes a formal contract?

• A. Usually oral and not enforceable.
• B. It must be in writing and sealed.
• C. Everyone signs it and it is enforceable.
• D. It is not legally binding.

Answer: (C)

Formal contracts are binding agreements recognized as enforceable because the parties have shown their agreement through signatures. When everyone signs, it evidences that each party intends to be bound and willing to fulfill the obligations, which is what makes the contract legally enforceable. In real estate, that enforceability is what gives the contract its power to compel performance or provide remedies if someone doesn’t follow through. While formal contracts are often written and may involve specific formalities, the essential idea is that signed agreement by the involved parties creates a binding obligation.