David entered into a contract to sell his home in Princeton, New Jersey. The contract did not contain a liquidated damages clause. The buyer defaulted one week before closing. David was forced to relist the property and sell it three months later for $18,000 less than the original contract price. He also incurred $4,500 in additional carrying costs during the delay. Under New Jersey law, what is the most accurate statement about David's remedies?
Correct Answer
D) David may seek compensatory damages including the price difference and carrying costs
In the absence of a liquidated damages clause limiting the seller's recovery, New Jersey law allows the non-breaching seller to pursue compensatory damages for the actual losses caused by the buyer's breach. This includes the $18,000 difference between the original contract price and the eventual resale price, as well as the $4,500 in carrying costs (mortgage payments, taxes, insurance, utilities) incurred during the delay. The goal of compensatory damages is to place the seller in the position he would have been in had the contract been performed.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
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