A purchase agreement in Arkansas is signed by both parties on March 1. The contract specifies a closing date of April 15 and states that 'time is of the essence.' The buyer fails to appear at closing on April 15 without providing any notice or explanation. Under Arkansas contract law, which of the following best describes the seller's position?
Correct Answer
B) The seller may declare the buyer in default and may retain the earnest money as liquidated damages
When a purchase agreement contains a 'time is of the essence' clause, the closing date is a material term of the contract. If the buyer fails to perform by that date without legal justification, the buyer is in default. Under Arkansas contract law, the seller may declare default and, if the contract so provides, retain the earnest money as liquidated damages for the buyer's breach.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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