A buyer and seller in California sign a purchase agreement for a single-family home in Fresno. The contract contains a liquidated damages clause. Under California Civil Code §1675, what is the maximum amount of liquidated damages a seller may retain from a defaulting buyer in a residential transaction involving 1-4 units?
Correct Answer
D) 3% of the purchase price
Under California Civil Code §1675, in a residential property transaction involving 1-4 dwelling units where the buyer intends to occupy the property, the liquidated damages clause is presumed valid if the amount does not exceed 3% of the purchase price. This is a California-specific cap designed to protect residential buyers.
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Related Topics & Key Terms
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Related Concepts
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.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
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