What is Liquidated Damages Clause In A California Real Estate Contract?

What is Liquidated Damages Clause In A California Real Estate Contract?

A liquidated damages clause is a provision included in some contracts allowing for th the payment of a specified sum of money should one of the parties breach the contract. In Real estate sales, the most common liquidate damages clause states the amount of money a seller will receive if the buyer defaults. To be deemed valid the amount of money "liquidated" to the seller should reflect a "reasonable estimate" of  the actual loss that the seller would suffer in the event of a buyer's breach. in most cases, this amount is determined to be the buyer's deposit.

While a liquidated damages clause can identify an amount of money other then the buyer's deposit as liquidated damages, the buyer's deposit is the most commonly used benchmark. Additionally, the amount for certain transactions is limited by law.

Courtesy of: Crescent Moon Realty, Inc.
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