Greg is an affiliate broker in Tennessee representing a buyer. Greg's buyer has signed a purchase agreement to buy a home. Before closing, the listing agent informs Greg that the seller has received a higher offer from another buyer. The seller wants to know if the original buyer would match the price. Greg's buyer says he will not increase his offer. The seller then attempts to cancel the contract to accept the higher offer. Which of the following is most accurate about the seller's ability to cancel?
Correct Answer
C) The seller cannot unilaterally cancel a binding purchase agreement simply because a better offer has been received; doing so constitutes breach of contract
Once a purchase agreement is fully executed (signed by both parties with acceptance communicated), it is a binding contract in Tennessee. The seller cannot unilaterally cancel the contract simply because a better offer has been received. Doing so would constitute a breach of contract, entitling the buyer to remedies including specific performance (compelling the sale) or money damages. Receiving a higher offer does not create any right of cancellation under Tennessee law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
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.
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