If a seller chooses to receive a buyer's earnest money after the buyer defaults on a contract it is known as _______.

When a seller chooses to retain a buyer's earnest money after the buyer defaults on a contract, this is referred to as liquidated damages. Liquidated damages are a predetermined amount of money that the parties agree upon at the time of contract formation to compensate one party in the event of a breach. In this context, the earnest money serves as a way for the seller to recover some loss without proving the actual damages incurred.

This approach provides clarity and efficiency, as it allows both parties to understand the consequences of a breach in advance. By retaining the earnest money, the seller is effectively exercising their right to liquidated damages, which acknowledges the value of the earnest money as a reasonable estimate of potential losses rather than pursuing further legal actions such as a lawsuit for specific performance or seeking monetary compensation through other means.

While other options represent different legal concepts related to breaches of contract, they do not appropriately describe the action of keeping the earnest money after a default. For instance, a suit for specific performance requires the party to fulfill the contract as agreed rather than opting for monetary benefits, and mutual rescission implies both parties agree to cancel the contract without retaining any deposits.