Maria signed a contract to purchase a home in Montclair, New Jersey for $525,000 and deposited $15,000 in earnest money. Before closing, Maria changed her mind and refused to proceed. The seller, unable to find another buyer at the same price, eventually sold the home for $505,000. Under New Jersey law, which remedy would most likely allow the seller to recover the full extent of his financial loss beyond just the deposit?
Correct Answer
D) Seek compensatory damages covering the $20,000 price difference and related costs
Under New Jersey contract law, when a buyer defaults and the seller suffers actual damages exceeding the deposit, the seller may pursue compensatory damages. Here the seller lost $20,000 on the resale price and may have incurred additional carrying costs and transaction expenses. If the contract does not limit the seller's remedy to the deposit as liquidated damages, the seller can seek actual compensatory damages to be made whole for the full financial loss caused by the buyer's breach.
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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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