A Virginia buyer, James, signed a purchase contract for a home in Chesapeake. The contract did not contain a liquidated damages clause. James later defaulted without any contingency protection. The seller, Linda, wants to pursue the maximum available remedy. Under Virginia law, which remedy is most likely available to Linda given the absence of a liquidated damages clause?
Correct Answer
D) Linda may pursue actual compensatory damages, which could exceed the earnest money deposit.
When a purchase contract does not contain a liquidated damages clause, the seller is not limited to retaining the earnest money. Instead, the seller may pursue actual compensatory damages in court, which are measured by the seller's real financial harm — such as the difference between the contract price and the eventual resale price, carrying costs, and other losses. These actual damages could be more or less than the deposit amount, depending on circumstances.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
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.
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