A Washington purchase and sale agreement provides that if the buyer defaults, the seller may retain the earnest money as liquidated damages 'as the seller's sole and exclusive remedy.' The buyer defaults, and the seller retains the $25,000 earnest money. The seller later discovers the property sold for $40,000 less than the original contract price to a subsequent buyer. The seller now wants to sue the original buyer for the additional $15,000 loss. Under Washington law, which outcome is most likely?
Correct Answer
A) The seller cannot recover the additional $15,000 because the liquidated damages clause was the seller's sole remedy
Under Washington contract law, when a purchase and sale agreement contains a valid liquidated damages clause designating the earnest money as the seller's 'sole and exclusive remedy' upon buyer default, the seller is contractually bound by that limitation. By accepting and retaining the earnest money as liquidated damages, the seller has exercised their sole remedy under the contract and cannot subsequently pursue additional actual damages. Washington courts enforce such clauses when they represent a reasonable pre-estimate of damages.
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Related Topics & Key Terms
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Related Concepts
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.
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
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