In a breach of contract scenario, which option would allow the wronged party to keep earnest money?

• A. Return the earnest money to the buyer.
• B. Place the funds in escrow for later decision.
• C. Forfeit the earnest money.
• D. Seek additional damages beyond the earnest money.

Answer: (C)

Earnest money is a deposit held in escrow to show the buyer’s serious intent to perform. When the buyer breaches the contract and the agreement includes a provision that the deposit can be forfeited as liquidated damages, the seller can keep that earnest money as compensation for the breach. This forfeiture is the straightforward remedy provided by the contract for a breach, so it’s the option that allows the wronged party to retain the funds.

Returning the money would defeat the breach consequence, and simply placing funds in escrow for later decision delays resolution rather than resolving it. Seeking additional damages beyond the earnest money is a separate remedy that would typically involve a separate damages claim rather than automatically keeping the deposit.