Definition
Termination happens when the contract ends before closing—through contingency exercise, mutual agreement, or breach. Each type has different earnest money consequences.
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Termination can occur through several mechanisms: contingency removal deadlines (if not removed), contingency exercise (using a valid contingency to exit), mutual agreement, or breach by the other party. Each type of termination has different consequences regarding earnest money and the parties' obligations. Understanding termination rights and deadlines is critical for protecting yourself during the transaction.
Pro Tip
Understand all termination options before signing.
Example
The buyer exercised the inspection contingency to terminate the agreement when major issues were discovered.