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.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
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