A seller in Texas receives a $1,000 option fee from the buyer. The buyer proceeds past the option period and then defaults on the contract. The seller claims both the option fee and the earnest money. In litigation, the buyer argues the option fee should be returned because the buyer did not terminate during the option period. The court would MOST likely rule that:
Correct Answer
D) The seller retains the option fee because it was non-refundable consideration, and the court will address the earnest money separately
The option fee is non-refundable consideration paid for the option period right. Whether or not the buyer exercises the option, the fee belongs to the seller. The court would address the earnest money dispute separately under the contract's default provisions.
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Related Topics & Key Terms
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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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