Ace the PSI New Jersey Real Estate Test 2026 – Unlock Your Property Power!

The correct answer highlights an important principle in contract law known as "impossibility of performance." When a contract becomes impossible for one of the parties to fulfill due to unforeseen circumstances, the agreement is typically terminated. This principle protects parties from being held to a contract when an essential element that makes performance possible is no longer available. For instance, if a natural disaster renders a property unavailable for sale, the seller’s obligation to transfer ownership is considered impossible, thereby terminating the contract.

The other options pertain to different scenarios that may not fulfill the legal requirements for contract termination. For example, simply because one party decides to back out does not necessarily terminate the contract; there are often legal ramifications unless both parties mutually agree to the termination. Mutual agreement is also a legitimate method of contract cessation but does not encompass the broader circumstances of impossibility that may arise without any mutual consent. Lastly, changes in legislation can affect the enforceability of a contract, but this does not equate to immediate termination unless the specifics of the situation dictate that the contract becomes void.