A Connecticut purchase agreement contains a clause stating that if the buyer defaults, the seller's sole remedy is to retain the earnest money deposit as liquidated damages. The buyer later defaults and the seller retains the $15,000 deposit. The seller then sues the buyer for an additional $30,000 in actual damages, claiming the liquidated damages clause is not exclusive. Under Connecticut contract law, how would a court most likely rule?
Correct Answer
B) The court would deny the additional damages because the contract expressly limited the seller's remedy to retention of the deposit as liquidated damages
When a Connecticut purchase agreement expressly states that the seller's sole remedy upon buyer default is retention of the earnest money as liquidated damages, that clause is enforceable as a limitation on remedies, provided the amount is a reasonable pre-estimate of damages. The seller agreed to this limitation and cannot later seek additional actual damages beyond what the contract permits.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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