Earnest Payment


Definition of Earnest Payment

Earnest payment refers to a type of a partial payment which is made to prove commitment to the contract. Providing an earnest payment binds the contract. The remainder of the payment is paid off on a future date. This type of payment is usually seen in a real estate transaction.



Earnest Payment Explained

If future payments are missed, the payment made as an earnest payment is usually kept by the recipient as committed or liquidated (pre-determined) damages.