Sandra is a licensed Tennessee affiliate broker representing the seller in a transaction. The buyer, James, submits a purchase offer with a $8,000 earnest money deposit. The contract is fully executed, but James later refuses to close without a valid contingency. The contract's liquidated damages clause states that the earnest money is the seller's sole remedy. Sandra's seller asks whether she can also sue James for lost commission. Under Tennessee law, what is the most accurate statement?
Correct Answer
C) The liquidated damages clause limits the seller's recovery to the earnest money, and the broker's commission claim must be pursued against the seller, not the buyer
Under Tennessee law, the liquidated damages clause limits the seller's contractual remedies against the defaulting buyer to the earnest money deposit. The broker's commission is owed by the seller under the listing agreement — a separate contract between the seller and the brokerage. If the sale does not close due to buyer default, the broker's claim for commission is against the seller (per the listing agreement terms), not against the buyer. The buyer is not a party to the listing agreement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
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.
More Contracts Questions
A Rhode Island salesperson asks about an owner is about to sign a purchase and sale agreement. What is the best answer?
For the Rhode Island state portion, how should a candidate analyze a seller asks the principal broker about commission split or distribution?
A Rhode Island principal broker reviews a licensee wants to enter a net listing contract. Which answer follows Rhode Island law?
A Rhode Island principal broker reviews a licensee takes a listing agreement. Which answer follows Rhode Island law?
Which Rhode Island rule applies when parties sign a listing, sale, lease, or other real estate contract?
- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
- → In Rhode Island, a licensee submits a written purchase or lease offer to an owner. Which statement is correct?
- → A Rhode Island salesperson asks about a listing agreement or contract for sale is prepared. What is the best answer?
- → Which Rhode Island rule applies when a listing agreement lists property with a multiple listing service?
- → A Rhode Island licensee encounters a listing agreement lets the principal broker retain a portion of deposit money upon buyer default. What should the licensee remember?
- → A Hawaii licensee is reviewing the commission asks to inspect escrow and trust records. What is the best answer?
- → A Hawaii broker asks a salesperson about a deed or lease is not recorded. Which answer follows Hawaii law?
- → For the Hawaii salesperson state portion, interest accrues on a trust-account deposit. Which statement is correct?
- → In a Hawaii real estate transaction, trust funds are placed with a neutral escrow depository for Hawaii property. What should the licensee remember?
- → For the Hawaii salesperson state portion, a licensee secures a party signature on a Hawaii listing or purchase contract. Which statement is correct?
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