A seller in Illinois retains the buyer's earnest money deposit after the buyer defaults, claiming it as liquidated damages. The purchase contract contains no liquidated-damages clause. Under Illinois law, which statement is most accurate?
Correct Answer
C) The seller may retain the deposit as liquidated damages only if the contract expressly authorizes that remedy and the amount is a reasonable estimate of anticipated damages.
Under Illinois contract law, a liquidated-damages clause must be expressly included in the contract and must represent a reasonable pre-estimate of the damages the parties anticipated at the time of contracting. Without such a clause, the seller cannot unilaterally treat the earnest money as forfeited liquidated damages; the seller's actual damages must be established through proper legal channels.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
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.
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