A buyer and seller in Paducah, Kentucky enter into a valid purchase agreement. Before closing, both parties mutually agree to cancel the transaction and sign a written release. The buyer is entitled to the return of the earnest money. What type of contract discharge does this represent?
Correct Answer
C) Discharge by mutual rescission
When both parties to a contract mutually agree to cancel the agreement and release each other from their obligations, this is called discharge by mutual rescission. In Kentucky, a mutual rescission of a real estate purchase agreement should be in writing to be enforceable under KRS 371.010, and it typically includes provisions for the return of earnest money to the buyer.
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Related Topics & Key Terms
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Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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