What happens if a buyer fails to perform their obligations under a Purchase Contract (PC)?

What happens if a buyer fails to perform their obligations under a Purchase Contract (PC)?

• A. The seller may keep the earnest money
• B. The seller must sue for damages
• C. The buyer loses all rights to the property
• D. The seller cannot take any action

Answer: (A)

When a buyer fails to perform their obligations under a Purchase Contract, the seller has the right to keep the earnest money. Earnest money is typically a deposit made by the buyer to demonstrate their serious intent to complete the transaction. If the buyer defaults on the contract, this earnest money can be forfeited to the seller as a form of compensation for the seller's loss or inconvenience. Keeping the earnest money does not automatically mean the seller cannot pursue additional remedies, such as suing for damages, but it is a common immediate consequence of the buyer's failure to perform. This retention of earnest money serves as a deterrent for buyers to fulfill their contractual obligations and also compensates sellers for potential losses incurred due to the breach. Other options, such as the seller being required to sue for damages or the buyer losing all rights to the property, do not reflect the standard legal outcomes of a default in a Purchase Contract. Similarly, stating that the seller cannot take any action fails to recognize their right to retain the earnest money as a straightforward consequence of the buyer's default.

When a buyer fails to perform their obligations under a Purchase Contract, the seller has the right to keep the earnest money. Earnest money is typically a deposit made by the buyer to demonstrate their serious intent to complete the transaction. If the buyer defaults on the contract, this earnest money can be forfeited to the seller as a form of compensation for the seller's loss or inconvenience.

Keeping the earnest money does not automatically mean the seller cannot pursue additional remedies, such as suing for damages, but it is a common immediate consequence of the buyer's failure to perform. This retention of earnest money serves as a deterrent for buyers to fulfill their contractual obligations and also compensates sellers for potential losses incurred due to the breach.

Other options, such as the seller being required to sue for damages or the buyer losing all rights to the property, do not reflect the standard legal outcomes of a default in a Purchase Contract. Similarly, stating that the seller cannot take any action fails to recognize their right to retain the earnest money as a straightforward consequence of the buyer's default.