When Kenneth kept the earnest deposit after Valerie backed out of the deal, what is this an example of?

When Kenneth kept the earnest deposit after Valerie backed out of the deal, what is this an example of?

• A. Overpayment
• B. Accepting liquidated damages
• C. Refunding earnest money
• D. Contractual breach

Answer: (B)

When Kenneth kept the earnest deposit after Valerie backed out of the deal, this situation exemplifies accepting liquidated damages. In real estate transactions, an earnest deposit is typically made to secure a purchase agreement, demonstrating the buyer's commitment to the transaction. If a buyer chooses to back out, the seller may have the right to retain this deposit as compensation for the inconvenience or potential financial loss incurred. This retention of the earnest money is a pre-agreed upon amount that serves as liquidated damages, which both parties accepted at the outset of the contract. This means that instead of going through the legal complexities of proving actual damages, the parties have predetermined that the earnest money will cover some of the risk associated with a breach of contract. In this case, Kenneth retaining the earnest deposit aligns with the concept of liquidated damages, as it represents a mutually agreed-upon consequence for Valerie’s decision to withdraw from the agreement.

When Kenneth kept the earnest deposit after Valerie backed out of the deal, this situation exemplifies accepting liquidated damages. In real estate transactions, an earnest deposit is typically made to secure a purchase agreement, demonstrating the buyer's commitment to the transaction.

If a buyer chooses to back out, the seller may have the right to retain this deposit as compensation for the inconvenience or potential financial loss incurred. This retention of the earnest money is a pre-agreed upon amount that serves as liquidated damages, which both parties accepted at the outset of the contract. This means that instead of going through the legal complexities of proving actual damages, the parties have predetermined that the earnest money will cover some of the risk associated with a breach of contract.

In this case, Kenneth retaining the earnest deposit aligns with the concept of liquidated damages, as it represents a mutually agreed-upon consequence for Valerie’s decision to withdraw from the agreement.