A buyer and seller enter into a Purchase Contract with a purchase price of $550,000. The contract includes a clause stating that if the buyer fails to close, the $10,000 deposit shall be forfeited to the seller as liquidated damages. The buyer breaches the contract and refuses to close. The market value of the property drops, and the seller eventually resells for $530,000, incurring $5,000 in additional carrying costs and relisting fees. What is the maximum amount the seller is entitled to claim from the buyer?

Question: A buyer and seller enter into a Purchase Contract with a purchase price of $550,000. The contract includes a clause stating that if the buyer fails to close, the $10,000 deposit shall be forfeited to the seller as liquidated damages. The buyer breaches the contract and refuses to close. The market value of the property drops, and the seller eventually resells for $530,000, incurring $5,000 in additional carrying costs and relisting fees. What is the maximum amount the seller is entitled to claim from the buyer?

Answer options: ✅ The seller is entitled to retain the $10,000 deposit as per the liquidated damages clause.

• The seller can claim $25,000 (total loss less deposit) in addition to retaining the deposit.
• The seller can only claim the actual documented losses that exceed the deposit amount.
• The seller must return the deposit and sue for actual damages up to $25,000.

Correct answer: The seller is entitled to retain the $10,000 deposit as per the liquidated damages clause.

Explanation: A liquidated damages clause sets a predetermined amount of damages to be paid in case of a specific breach. If it's a genuine pre-estimate of loss, it's generally enforceable, limiting the seller to the deposit amount and preventing them from claiming more, even if actual damages are higher.