A Michigan buyer defaulted on a residential purchase agreement that contained a valid liquidated damages clause designating the earnest money as the seller's sole remedy. All of the following statements about the seller's remedies are correct EXCEPT:
Correct Answer
C) The seller may simultaneously retain the earnest money and sue for specific performance
Option C is the EXCEPT answer because it is incorrect. When a purchase agreement contains a liquidated damages clause designating the earnest money as the seller's sole remedy, the seller's recovery is limited exclusively to retaining the earnest money. The seller cannot simultaneously retain the earnest money as liquidated damages AND pursue specific performance—these are mutually exclusive remedies. Electing one forecloses the other, and the 'sole remedy' language in the clause makes the limitation explicit.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
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.
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