Maryland Home Improvement PSI Practice Exam

An example of contract termination due to inability to perform involves which situation?

1. Purchaser unable to make payment

2. Seller died after contract became binding

3. Seller sold entire property without consent

4. Property was damaged by fire after contract

The correct answer is: Seller sold entire property without consent

The situation in which a contract may be terminated due to inability to perform involves scenarios where one party can no longer fulfill their obligations under the agreement. In the case of a seller who sold the entire property without consent, this clearly indicates a failure to perform the terms of the contract. A binding contract typically stipulates that the seller cannot sell the property to anyone else until the terms of the initial agreement are met. By selling the property to another party without the purchaser's consent, the seller has effectively made it impossible to fulfill the obligations outlined in the original contract. This unauthorized action leads to an inability to complete the sale to the initial purchaser, justifying termination of the contract. The other scenarios presented do not demonstrate an inability to perform in the same context of contract termination under standard contractual agreements. For example, the purchaser's inability to make a payment may lead to default but does not pertain to the seller's inability. The death of the seller could complicate performance but may not automatically terminate the contract, depending on state laws and contract specifics. Lastly, if the property were damaged by fire, it may impact the contract but typically would not result in termination; instead, it may invoke terms regarding property damage or insurance.