What if the buyer on the buyer does not showing up to closing, therefor defaulting on the contract? 
The seller showed up to closing and performed but the buyer did not. The buyer then refused to release the earnest money so title held the earnest money in dispute.
Because the buyer defaulted on the contract and the seller is willing to accept the earnest money as a remedy of the default, can the seller accept another contract and sell the property without recourse since the only dispute is over the distribution of the earnest money from prior contract?

As Dawn mentioned, what we do is have a home grown form that cancels the contract (buyer & seller sign) but specifically states that the disposition of the earnest money will be negotiated separately.

did you have a termination of contract letter?  Just wondering if you have that and the only dispute is over the earnest money if you can put the house back on the market and sale?