Adams signed a contract in which he promised to sell his house to Jefferson for $225,000. The deposit to be paid was set at $4000, and the liquidated damages clause provided that the deposit would be forfeited in the event that the buyer breached the contract. The buyer did breach the contract. Because the cost of housing was falling, it was difficult, even after a reasonable time had passed, to find a new buyer. The highest offer was $218,000. Adams accepted. Which of the following is true with regard to Adams' remedies?
A) He would be entitled to damages for money lost-$7000 plus selling costs.
B) He would be entitled to the $4000 only, if the court held that the deposit was an honest attempt of the parties to estimate damages.
C) He could sue for an injunction to stop Jefferson from buying another house.
D) He could ask the court to order an accounting.
E) Adams must sue for specific performance, which is the only remedy, an equitable remedy, available to the parties in land transactions.

Question

Quizplus · Accepted Answer

The liquidated damages clause allows Adams to retain the $4000 deposit if it was a reasonable estimate of potential damages at the time of contract formation.

Adams Signed a Contract in Which He Promised to Sell