The contracting parties may agree that either one or both of them have the right to withdraw from the contract if they pay a termination fee (compensation for withdrawal). If the party entitled to withdraw from the contract (the entitled party) declares to the other party that they will pay the termination fee, they can no longer demand performance of the contract. The party with the right to withdraw must pay the termination fee simultaneously with the declaration of withdrawal. If the contracting parties have not specified a deadline by which the entitled party may exercise the right to withdraw from the contract, they may do so until the time for fulfilling their obligation expires. The right to withdraw from the contract also ceases if the entitled party begins to fulfil their contractual obligations or accepts performance from the other party.151 The termination fee also serves, at least indirectly, to reinforce the obligation. A party demands acceptance of the termination fee due to the other party’s withdrawal from the contract (i.e., receiving a specific amount in addition to any compensation) to prevent the other party from withdrawing from the contract.152
The difference between earnest money and a termination fee is primarily that the termination fee is not paid in double the amount as is the case with earnest money, and that either party to the contract may withdraw from the contract by paying the termination fee, whereas earnest money can only be claimed by the non-breaching party.153 If the parties have agreed on the right to withdraw from the contract in connection with the earnest money, the earnest money is considered a termination fee, and either party may withdraw from the contract. In this case, if the party that provided the earnest money withdraws, they lose it; if the party that received the earnest money withdraws, they must return double the amount.154
