Contracts, Transfer, and Escrow Practice Question

Question

A first-time buyer asks for exam-focused clarification involving risk of loss. The parties need a practical answer before moving forward. Which answer best applies the rule? (Item 20)

Answer choices

1. A. It is valid only when the buyer pays cash and no lender is involved.
2. B. It prevents any later disclosure, even when new facts become known.
3. C. It applies only to commercial property and never to residential transactions.
4. D. Recognize contract allocation and insurance considerations before closing.

Correct Answer

D. Recognize contract allocation and insurance considerations before closing.

Explanation

The correct answer is D because risk of loss requires candidates to recognize contract allocation and insurance considerations before closing. The other options overstate the effect of custom, oral agreement, escrow, or independent salesperson action and do not reflect safe California exam practice.

Question details

• Difficulty: hard
• Domain: Contracts, Transfer, and Escrow
• Objective: risk of loss

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