Key Takeaways
- The Amendment to Contract form is used to modify any term of an existing contract with both parties' consent
- Termination of a contract requires proper use of the appropriate form based on the reason for termination
- Earnest money disputes are resolved by agreement, interpleader, or mediation—not by the title company deciding
- The option period termination must be in writing and delivered before the option period expires
- Default by either party may entitle the non-defaulting party to specific performance or earnest money
Contract Amendments and Termination
After a contract is signed, it may need to be modified or terminated. Texas has specific promulgated forms and procedures for these situations.
Amendment to Contract
The Amendment to Contract form is used to modify any term of an existing executed contract.
When to Use an Amendment
| Situation | Amendment Needed |
|---|---|
| Change closing date | Yes |
| Change sales price | Yes |
| Add or remove terms | Yes |
| Correct errors | Yes |
| Extend financing deadline | Yes |
| Change repairs agreed to | Yes |
Amendment Requirements
| Requirement | Description |
|---|---|
| Written form | Use promulgated Amendment form |
| Both parties sign | Mutual consent required |
| Reference original | Identify the contract being amended |
| Specific changes | Clearly state what is being changed |
Key Point: Oral amendments are NOT enforceable. All changes must be in writing and signed by both parties.
What Cannot Be Amended
Some changes are so significant they require a new contract:
| Change | New Contract Needed? |
|---|---|
| Change parties | Yes (new buyer/seller) |
| Change property | Yes (different property) |
| Major restructuring | Usually yes |
Contract Termination
Contracts may be terminated for various reasons. Each has a specific procedure.
Termination Methods
| Method | When Used | Earnest Money |
|---|---|---|
| Option period | Buyer exercises option right | Refunded to buyer |
| Financing failure | Buyer cannot obtain loan | Refunded to buyer |
| Title defects | Title cannot be cured | Refunded to buyer |
| Mutual agreement | Both parties agree | Per agreement |
| Default | One party breaches | To non-defaulting party |
Option Period Termination
To terminate during the option period:
| Requirement | Details |
|---|---|
| Written notice | Use Notice of Buyer's Termination |
| Delivery | Must be received before deadline |
| No reason required | Can terminate for any reason |
| Earnest money | Refunded to buyer |
| Option fee | Non-refundable (seller keeps) |
Earnest Money Disputes
When buyer and seller disagree about who gets the earnest money:
| Resolution Method | Description |
|---|---|
| Written agreement | Both parties sign release |
| Interpleader | Title company files with court |
| Mediation | Neutral third party helps resolve |
| Litigation | Court decides |
Important: The title company CANNOT decide who gets the earnest money. They can only release it with agreement of both parties or court order.
Default and Remedies
Buyer Default
If the buyer defaults, the seller may:
| Remedy | Description |
|---|---|
| Keep earnest money | As liquidated damages |
| Specific performance | Sue to force buyer to close |
| Actual damages | Sue for actual losses |
Seller Default
If the seller defaults, the buyer may:
| Remedy | Description |
|---|---|
| Return of earnest money | Full refund |
| Specific performance | Sue to force seller to convey |
| Actual damages | Sue for actual losses |
How can a title company release earnest money when the buyer and seller disagree about who should receive it?
What is required for a buyer to properly terminate during the option period in Texas?