The contract states in advance that if the buyer defaults without excuse, the seller may retain the earnest money as the agreed remedy. What remedy provision is this?
Correct Answer
C) Liquidated damages
Liquidated damages is correct because the facts match a contractually agreed amount, often earnest money, that may be retained as the remedy if a party breaches under the terms of the contract. That is the best description of the relationship, right, or legal concept tested here.
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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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