When a buyer defaults on a real estate purchase contract, the seller's available civil remedies may include:
Correct Answer
B) Retaining the earnest money, suing for specific performance, or suing for actual damages
When a buyer defaults, the seller has three main civil remedies: (1) retain the earnest money deposit as liquidated damages, (2) sue for specific performance to compel the buyer to complete the purchase, or (3) sue for actual damages suffered as a result of the breach. The seller typically elects one remedy. Contract default is a civil matter, not a criminal one.
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Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
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