A buyer and seller in Anaheim enter into a C.A.R. RPA for a single-family home at $800,000. The buyer deposits $18,000 in earnest money. Both parties initial the liquidated damages clause and the arbitration clause. The buyer later defaults. The seller claims $35,000 in actual damages. Under California Civil Code §1675, what is the seller's position?
Correct Answer
C) The seller may retain $18,000 under the liquidated damages clause since the deposit is below the 3% cap of $24,000
Under California Civil Code §1675, liquidated damages for residential one-to-four unit properties are presumed valid up to 3% of the purchase price. Three percent of $800,000 is $24,000. The buyer's deposit of $18,000 is below the 3% cap, so the seller may retain the entire $18,000 as liquidated damages. However, the liquidated damages clause generally operates as an exclusive remedy, limiting the seller's recovery to the deposit amount.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
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