A Nevada purchase agreement includes a clause stating that if the buyer defaults, the seller shall retain the earnest money as liquidated damages and that such retention shall be the seller's sole remedy. The buyer subsequently defaults. Under Nevada law, what is the seller's position?
Correct Answer
B) The seller may retain the earnest money as liquidated damages, and this is the seller's only remedy if the clause is enforceable
In Nevada, liquidated damages clauses in purchase agreements are enforceable when the amount is a reasonable estimate of actual damages and actual damages would be difficult to calculate. When a purchase agreement specifies that earnest money retention is the seller's 'sole remedy' upon buyer default, the seller is contractually limited to that remedy and cannot pursue additional damages if the clause is valid and enforceable under Nevada contract law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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