hard · National Real Estate Exam
A seller and buyer sign a purchase agreement that says the buyer must deposit $10,000 earnest money "within three business days, time being of the essence as to this provision." The buyer deposits on the fourth business day. The seller, who has meanwhile received a higher backup offer, immediately notifies the buyer the contract is terminated for the late deposit and refuses to proceed. The buyer sues for specific performance.
Under general common-law contract principles, what is the buyer's strongest legal argument that the contract remains enforceable despite the late deposit?
- The earnest-money clause is a covenant rather than a condition, so its breach gives the seller only a damages remedy, not a right to cancel, because timely deposit was not made an express condition precedent to the seller's duty to convey
- Time-of-the-essence clauses are unenforceable as penalties in residential real-estate transactions, so the one-day delay must be excused
- The buyer's late deposit constitutes a material breach, but the seller waived it by accepting the funds before sending the termination notice
- Because the delay was only one day and caused no actual prejudice, the doctrine of substantial performance fully discharges the buyer's obligation and bars any cancellation
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