Buyer Martinez defaults on a purchase contract after the inspection period expires. The seller wants to keep the $8,000 earnest money deposit. Both parties signed a contract with a liquidated damages clause. What should the broker do?
Correct Answer
C) Obtain written agreement from both parties or seek FREC guidance
Correct: Even with liquidated damages clauses, brokers must obtain written agreement from both parties or seek FREC guidance for disputed funds. Why not A: Cannot unilaterally release without buyer agreement. Why not B: Buyer defaulted after inspection period, no automatic right to funds. Why not D: Cannot arbitrarily split funds without agreement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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.
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