Affiliate Broker Tennessee (TN PSI) National Practice Exam `

When Sam and Gina agreed to cancel the sale of the home after the inspection, this situation is an example of ______.

1. Terminating the listing agreement

2. Mutual agreement to rescind the contract

3. Failure to perform

4. Unilateral termination

The correct answer is: Mutual agreement to rescind the contract

The situation where Sam and Gina agreed to cancel the sale of the home after the inspection demonstrates a mutual agreement to rescind the contract because both parties have come to a consensus to void or nullify the contract that they previously entered into. This fulfillment of mutual consent is essential in contract law, allowing both parties to exit the contractual obligations without any penalties or liabilities, as opposed to unilateral termination, where one party seeks to end the contract without the other's agreement. In this context, a mutual agreement to rescind signifies that both Sam and Gina recognized a circumstance that warrants ending their contractual relationship and decided together to take that action following the inspection results, thus making it a collaborative decision rather than a unilateral one. This can also provide a clear understanding of their intentions and agreements moving forward.