(a) Claiming the Deposit
If a buyer repudiates the agreement, the seller may simply accept the repudiation, treat the agreement as being at an end, and return the deposit to the buyer. In practice, this alternative is seldom considered. Generally, the seller wishes, at the very least, to claim forfeiture of the deposit.
Most purchase contracts will include a term providing for the forfeiture of the deposit to the seller if the buyer repudiates. In some circumstances, the seller will be content to take the deposit in full satisfaction of the seller’s claims. In other cases, the seller will want to receive the deposit and to pursue additional remedies, such as specific performance and damages.
(b) Specific Performance or Damages
Like the buyer, the seller may be able to claim one of the following, depending on the circumstances:
(i) specific performance and damages;
(ii) damages in lieu of specific performance; or
(iii) common law damages.
To enforce the agreement, the seller may sue for specific performance or for damages for breach of contract. Although the remedies are consistent, they are alternative remedies. At or before trial, the seller must select between them. If the seller wishes, the seller may elect only one of the alternative remedies before taking action, although it is usually better to maintain options if you can.
If the property is resold by the seller, or if the seller doubts the buyer’s ability to specifically perform, or wishes to keep the property while seeking compensation for diminution in value, the seller may elect to recover damages.
No matter how the damages are calculated, when contemplating litigation, it must be remembered that a non-defaulting seller cannot rest on his right to sue in the hope of eventually making himself whole – he has a duty to mitigate or minimize his losses and may need to aggressively sell the property. If the Court finds that the seller hasn’t properly mitigated its losses, the seller may not be awarded full indemnification.