Texas Real Estate State Practice Exam

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When does the effective date of a contract occur?

At the time of negotiation
When the offer is made
On the date of closing
On the date the last party signs

The correct answer is: On the date the last party signs

The effective date of a contract is established on the date the last party to the agreement signs the contract. This moment signifies mutual acceptance of all terms outlined in the contract by both parties involved. Until this point, there may be negotiations, offers, and discussions, but the contract has not yet come into effect. Although negotiations and offers are essential in the contracting process, they do not create an enforceable agreement until both parties have agreed to the final terms. The date of closing refers to the time when the transaction is completed and ownership is transferred, but it does not denote the beginning of the contractual obligations outlined in the agreement. Thus, the defining moment for determining when a contract becomes effective is indeed the date when all parties have signed, indicating that there is a mutual agreement to the terms set forth.