Earnest Payment Legal Meaning and Definition

Here is a simplified definition of the legal term Earnest Payment.

Earnest Payment (noun): It is an initial deposit or advance given to show a party's serious interest or commitment in a contract or deal. This payment is towards the total sum that would be paid in the future. If the party who paid this amount fails to complete the transaction or payment as agreed, the receiver can keep this earnest payment as compensation for the breach of contract.