Kevin is a buyer who signed a purchase and sale agreement for a home in Tacoma with a $8,000 earnest money deposit. The contract includes a seller's remedy clause stating that if the buyer defaults, the seller may retain the earnest money as liquidated damages. Kevin later decides not to purchase the property without any contractual justification. Under Washington law, which of the following best describes the legal effect of the liquidated damages clause?
Correct Answer
B) The clause limits the seller's remedy to the $8,000 earnest money and bars the seller from seeking additional damages
Under Washington contract law, a valid liquidated damages clause in a purchase and sale agreement that designates earnest money as the seller's sole remedy upon buyer default limits the seller to retaining that amount. The clause serves as a pre-agreed measure of damages, and by accepting it, the seller waives the right to pursue additional damages beyond the specified earnest money amount. Washington courts uphold such clauses when the amount is a reasonable estimate of anticipated damages.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
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