Default Doesn’t Mean Dead: Understanding Default and the Right to Cure in the GAR Contract

CCK
1 day ago
4 min read

In Georgia real estate contracts, there are defaults that DO NOT automatically terminate the contract. Instead, GAR contracts often require notice and an opportunity to cure before a party can take further action.

Understanding when a default exists, who must give notice, and how the right to cure works is critical to protecting your client—and your license.

What Is a Default?

A default occurs when a party fails to perform a contractual obligation required by the Purchase and Sale Agreement or an applicable exhibit.

Common buyer defaults that include a right to cure include:

Failure to timely deliver earnest money
Dishonored earnest money (returned or rejected funds)
Failure to provide Verification of Funds (commonly required under F401 – No Financing Contingency)
Failure to provide Evidence of Ability to Close under all of the financing contingency exhibits

These are failures, but not deal-ending events—unless the required notice is given and the default is not cured.

Default ≠ Termination

This is one of the most misunderstood points in Georgia contracts.

A party does not automatically gain termination rights simply because the other side defaults.

In many cases, the contract requires:

Proper notice as defined in Section C.1. of the GAR purchase and sale agreements
Given by the proper party
Allowing a specific cure period

Skipping any of those steps can put the seller in default for terminating without a right to do so.

Who Must Give Notice?

The right to cure is triggered only when notice is given by the correct party, as defined in the agreement:

Earnest Money defaults
→ Notice must be given by the Earnest Money Holder, typically using GAR Form F528
Verification of Funds
→ Notice must be given by the Seller, typically using GAR Form F816
Evidence of Ability to Close
→ Notice must be given by the Seller, also using GAR Form F816

If the wrong person sends the notice—even if the content is correct—the notice may be ineffective.

When the Closing Attorney is the Holder, this can be particularly tricky. The seller may want to start the clock for the buyer cure period, but they do not have the power to do so. The Closing Attorney may not want to send notice because they do not know what the motivations of the parties are since they are not included in many of the conversations between the buyer and the seller. One option to resolve both issues is for the seller side to fill out of the F528 Holder Notice, send it to the Closing Attorney, and request / demand that the Closing Attorney send it to the parties as required by the contract. The Closing Attorney may need to be reminded that they assumed the responsibilities of the Holder when they signed the GAR F511 AGREEMENT OF CLOSING ATTORNEY TO SERVE AS HOLDER OF EARNEST MONEY. The Closing Attorney has no license to use this form so one of the agents in that transaction will need to provide it.

Cure Periods Matter (and They’re Short)

Once proper notice is given, the buyer is entitled to a limited window to fix the problem:

Earnest Money Issues
→ Buyer has 3 Banking Days from the date of notice
Verification of Funds
→ Buyer has 3 Days from the date of notice
Evidence of Ability to Close
→ Buyer has 2 Days from the date of notice

These deadlines are strict. Note that the words Banking Days and Days are capitalized because they are defined terms in the GAR forms.

What Happens If the Default Is Cured?

If the buyer cures the default within the allowed time, the contract continues as if the default never occurred.

That means:

No termination
No forfeiture
No leverage gained by the other side

Many brokers will ask the agents to amend the contract to deflect the actual earnest money delivery date. This is not legally necessary, but there is also no harm in doing so.

What Happens If the Default Is NOT Cured?

If the buyer fails to cure after proper notice, only then may the non-defaulting party exercise the remedies available under the contract—which may include termination or other contractual rights.

But without proper notice and the opportunity to cure, those remedies may not be enforceable.

Termination Decisions

The seller has limited time to decide whether to terminate. If they do not terminate timely, they have waived their right to terminate.

If the seller terminates for failure to deliver earnest money, they have the right to sue the buyer for the earnest money that should have been paid.

If the seller terminates for failure to deliver Verification of Funds or Evidence of Ability to Close, the Seller has the right to receive the earnest money.