Recovery of earnest money
The liquidated damages provision is thus an agreed-upon, estimated guess of the actual damages the seller would sustain if the buyer breached the agreement by failing to close. Many court battles have been fought over the validity or enforceability of liquidated damages clauses, since they often result in unfair consequences to the buyer.
Earnest money recovery
In most cases, the issue in litigation is whether the amount is too large and thus penalizes the buyer. The Court used its equitable powers to award damages beyond the amount of the liquidated damages. The Court did so because it found that the amount stipulated was disproportionately lower than damages actually sustained by the sellers.
This case brings up another point: Courts have sometimes ruled that the liquidated damages provision may not apply and the seller could sue for further damages. The rationale is that the release of the earnest money is a condition of the limitation of liability afforded to the buyer under the liquidated damages clause.
recovering earnest money - ditycapylal.web.fc2.com Community
The Court rejected this argument:. The liquidated damages clause is for the benefit of the buyer, to limit their liability in the case of breach. If the buyer has breached a real estate contract by failing to close and have refused to forfeit the escrow money, the seller is not bound by the liquidated damages clause. There is little case law on this subject, so the result of a court trial would be unpredictable.
When can a buyer back out and not lose earnest money?The moral of the story? Do the right thing and release the earnest money from escrow to the seller. THIS CONTENT IS PROTECTED, TO GAIN ACCESS, PURCHASE BELOW.
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