In a California residential real estate transaction, the buyer defaults on the purchase contract. The contract includes a properly executed liquidated damages clause. The seller wants to pursue both liquidated damages and actual damages in court. Under California law, which statement is correct?
Correct Answer
B) The seller must choose between liquidated damages or actual damages but cannot pursue both
Under California law, a liquidated damages clause is an exclusive remedy when properly executed. The seller must elect between retaining the liquidated damages amount or pursuing actual damages through litigation. The seller cannot receive both. By initialing the liquidated damages clause in the RPA, the parties agree that the specified amount is the sole damages recoverable.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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