In a Texas transaction, the buyer delivers a personal check for $5,000 as earnest money. The contract requires the earnest money to be deposited within 3 days of the effective date. If the check bounces, what is the potential consequence for the buyer?
Correct Answer
B) The buyer may be in default under the contract for failure to deposit earnest money
A bounced earnest money check means the buyer has failed to deposit the required earnest money. This may constitute a default under the contract, giving the seller remedies under Paragraph 15 including the right to terminate.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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.
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