A buyer in Tucson defaults on a purchase contract after the inspection period has expired. The contract contains a liquidated damages clause stating the seller may retain the earnest money deposit of $5,000. The seller's actual damages from remarketing the property total $12,000. What can the seller recover under Arizona law?
Correct Answer
A) Only the $5,000 earnest money as liquidated damages
Under Arizona law, when parties agree to liquidated damages, the non-breaching party typically cannot recover more than the liquidated amount, even if actual damages exceed it. Option B is incorrect because the liquidated damages clause limits recovery. Option C is incorrect because Arizona generally doesn't allow recovery of both liquidated and actual damages. Option D is incorrect because the buyer defaulted after the inspection period expired.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
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