Short answer. It depends on why the sale failed. Earnest money is part of the price of a perfected sale, so it is not a fee the seller simply keeps. Where the sale collapses through the seller's fault, or through a condition that was never met, the buyer is generally entitled to have it back.
What the law says
Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.
Civil Code, Article 1482 — Earnest Money. Read the full provision →
It is part of the price, so it is not the seller's by default
Article 1482 of the Civil Code provides that earnest money shall be considered as part of the price and as proof of the perfection of the contract. A sum that forms part of the price is money paid on account of the purchase, not a charge for holding the property or for the seller's trouble. If the sale is later undone, that sum has to be accounted for like any other partial payment. This is why a seller's position that the money is simply his because the deal fell apart is not the starting point the Code sets — it needs a legal basis of its own.
Earnest money and option money are not the same thing
The single most useful distinction here is what the payment actually was. Earnest money presupposes a sale already agreed on the thing and the price. Money paid for an option is different: it buys a period during which the buyer may decide, and the buyer who decides not to proceed has received exactly what he paid for, so it is ordinarily not returnable. Documents use the two terms loosely, and the receipt may be the only record of which was intended. Read what it says about the price and the balance before assuming which applies.
Who caused the failure usually decides the answer
If the seller cannot deliver — a defective title, an undisclosed encumbrance, a co-owner who will not sign, or a decision to sell elsewhere — the buyer has not defaulted and there is no ground to keep his money. Article 1191 gives the injured party the choice between fulfilment and rescission with damages in either case, and Article 1385 requires that rescission bring about the mutual restitution of the things which were the object of the contract with their fruits and the price with its interest. Restitution is the rule when a sale is unwound; forfeiture is the exception and has to be justified.
Conditions that were never met
Many sales are agreed subject to something happening — bank approval of the buyer's loan, the release of a title, the completion of a subdivision of the lot. Article 1545 provides that where the obligation of either party is subject to a condition that is not performed, that party may refuse to proceed with the contract or may waive performance of the condition. Where a stated condition genuinely failed and neither side is to blame, there is no default to penalise, and the payment made on account of the price should ordinarily come back. The condition needs to be written down, though — an understanding nobody recorded is very hard to establish later.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- San Miguel Properties Philippines, Inc. vs. Spouses Alfredo Huang and Grace Huang, G.R. No. 137290, July 31, 2000 — read the decision on LawPhil →
- Sps. Onnie Serrano etc. vs. Godofredo Caguiat, G.R. No. 139173, February 28, 2007 — read the decision on LawPhil →
- Venustriano B. Chavez, Jr., Maria Carmita C. Certeza, et al. vs. Spouses Joselito and Adriana Gopez, G.R. No. 242366, February 26, 2025 — read the decision on LawPhil →
- Victoria N. Racelis vs. Spouses Germil Javier and Rebecca Javier, G.R. No. 189609, January 29, 2018 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1482 — Earnest Money
- Civil Code, Article 1191 — Rescission of Reciprocal Obligations
- Civil Code, Article 1385 — Mutual Restitution; Limits
- Civil Code, Article 1545 — Conditions and Warranties