In a Tennessee real estate transaction, the seller breaches the purchase contract by refusing to close. The buyer had already paid for a home inspection ($450), an appraisal ($600), and loan application fees ($300). The buyer does not want to pursue specific performance. What type of damages would most accurately compensate the buyer for these out-of-pocket costs under Tennessee contract law?
Correct Answer
C) Compensatory damages, to reimburse the buyer for actual losses incurred in reliance on the contract
Compensatory damages in Tennessee are designed to make the non-breaching party whole by reimbursing actual losses. The buyer's inspection, appraisal, and loan fees are reliance damages — costs incurred in reasonable reliance on the contract being performed. Since the buyer does not wish to pursue specific performance, compensatory damages covering these out-of-pocket expenses are the appropriate remedy to restore the buyer to the position they were in before entering the contract.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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.
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