Conrad contracts to sell his house and lot to Winifred for $100,000. The terms of the purchase agreement require Winifred to pay 10 percent of the purchase price as a deposit toward the purchase price. The terms further stipulate that should the buyer breach the contract, the deposit will be retained by Conrad. Such a good faith deposit is called:
A)Liquidated damages
B)A mortgage
C)PMI
D)Equity

Question

Conrad contracts to sell his house and lot to Winifred for $100,000. The terms of the purchase agreement require Winifred to pay 10 percent of the purchase price as a deposit toward the purchase price. The terms further stipulate that should the buyer breach the contract, the deposit will be retained by Conrad. Such a good faith deposit is called:​
A)Liquidated damages
B)A mortgage
C)PMI
D)Equity

Quizplus · Accepted Answer

Liquidated damages are a predetermined form of compensation set at the time of contract formation, to be paid if one party breaches the contract. In this scenario, the deposit serves as liquidated damages for Winifred's potential breach.

Conrad Contracts to Sell His House and Lot to Winifred