Marcus and Linda enter into a Tennessee real estate purchase contract for a home listed at $285,000. Marcus deposits $5,000 in earnest money. Before closing, Marcus decides to back out of the deal without any valid contractual contingency to rely on. The contract contains a standard liquidated damages clause. What is Linda's most likely remedy under Tennessee law?
Correct Answer
B) Linda may retain the $5,000 earnest money as her agreed-upon remedy
When a buyer defaults without a valid contingency and the contract contains a liquidated damages clause, the seller is entitled to retain the earnest money deposit as the pre-agreed remedy. Under Tennessee contract law, this clause is enforceable when the amount represents a reasonable estimate of the seller's anticipated damages. Linda retains the $5,000 and typically cannot pursue additional remedies unless the contract expressly preserves that right.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
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.
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