A Maryland buyer, Diane, exercised a home inspection contingency in her purchase contract after receiving an unsatisfactory inspection report. The seller, Tom, refused to make any repairs or reduce the price, so Diane gave proper written notice to terminate the contract within the contingency period. Tom claims Diane is in breach and demands to keep the $7,500 earnest money deposit. Under Maryland contract law, what is the most accurate outcome?

Correct Answer

B) Diane is entitled to a full refund of the $7,500 deposit because she properly exercised a valid contractual contingency

When a buyer properly exercises a valid contractual contingency — such as a home inspection contingency — within the specified timeframe and in accordance with the contract terms, the buyer has not breached the contract. The termination is a lawful exercise of a contractual right. Under Maryland law, Diane is entitled to a full refund of her $7,500 earnest money deposit because she did not default; she exercised a right expressly granted by the contract.