Linda is a Michigan licensed broker who received a $8,000 earnest money deposit from buyer Carlos after he signed a purchase agreement. Carlos later defaulted on the contract. The seller demanded the earnest money, but Carlos also sent Linda a letter claiming the funds should be returned to him. What is Linda's most appropriate course of action under Michigan law?
Correct Answer
C) Continue to hold the funds in the trust account until the dispute is resolved by the parties or a court
Under the Michigan Occupational Code (MCL 339.2512), when there is a dispute over earnest money held in a broker's trust account, the broker must continue to hold the funds in the trust account until the dispute is resolved—either by written agreement of both parties or by court order. Linda may not unilaterally release the funds to either party when there is a contested claim. Releasing funds prematurely could constitute a disciplinary violation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
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