New York State Notary Practice Exam

What is defined as an agreement between competent parties to do or not do certain things for legal consideration?

1. Contract

2. Consideration

3. Conveyance

4. Escrow

The correct answer is: Contract

The correct answer is a contract, which is fundamentally defined as a legally binding agreement between competent parties. This agreement entails an obligation to do or abstain from doing specific actions in exchange for legal consideration, which refers to something of value that is exchanged between the parties involved, such as money, services, or goods. Contracts can be written or oral, though certain types must be in writing to be enforceable. Consideration, while a crucial element of a contract, does not encompass the entire definition itself; rather, it is a key component that demonstrates the agreement's legality. Conveyance typically refers to the process of transferring ownership of property from one party to another, which does not entail the broader concept of an agreement to act (or refrain from acting) as seen in a contract. Escrow involves the holding of funds or documents by a third party until certain conditions are fulfilled and is not defined as an agreement between parties but rather a financial arrangement related to the execution of certain actions specified in agreements, such as contracts.