Introductory Business Law CLEP Prep Practice Exam

What is the state in which a contract is considered legally binding?

1. Offer

2. Counteroffer

3. Agreement

4. Performance

The correct answer is: Agreement

Agreement refers to the state in which a contract is considered legally binding. While offer, counteroffer, and performance are all important elements of creating a valid contract, they do not necessarily make the contract legally binding. An offer is an indication of willingness to enter into a contract, while a counteroffer is a rejection of the original offer and creates a new offer. Performance refers to the act of fulfilling the terms of the contract, but it is not the same as legally binding. It is only when all parties involved have reached an agreement and given their consent to the terms of the contract that it becomes legally binding. Therefore, agreement is the most accurate choice in this scenario.