Contracts
An Alaska purchase agreement contains a 'liquidated damages' clause with the earnest money set at $25,000 on a $500,000 purchase. If a court were to review this clause, the court would likely find it enforceable if:
AThe amount exceeds 5% of the purchase price
BThe amount represents a reasonable estimate of the seller's actual damages from a buyer's default✓ Correct
CBoth parties are represented by attorneys
DThe earnest money was deposited in a federally insured account
Explanation
For a liquidated damages clause to be enforceable, courts look for: (1) the damages would be difficult to calculate, and (2) the agreed amount represents a reasonable forecast of compensatory damages. $25,000 (5% of $500,000) is generally considered a reasonable liquidated damages amount for real estate.
People Also Study
Related Alaska Questions
- A buyer defaults on a purchase contract in Alaska. If the contract contains a liquidated damages clause limited to the earnest money, the seller's remedy is:Contracts
- In Alaska, liquidated damages in a purchase agreement typically refer to:Contracts
- A buyer in Alaska wishes to back out of a purchase agreement after all contingencies have been removed. The seller chooses to keep the earnest money and release the buyer. This arrangement is called:Contracts
- In Alaska, a 'liquidated damages' clause in a purchase agreement specifies:Contracts
- When a buyer terminates a purchase agreement without a valid contractual reason and forfeits earnest money, the broker:Alaska License Law
- An Alaska seller retains a real estate attorney to review the purchase agreement. Attorney's fees for this service are typically paid by:Escrow & Title
- A real estate salesperson in Alaska receives an earnest money deposit from a buyer. The salesperson should:Alaska License Law
- In Alaska, if a real estate firm represents both the buyer and seller in the same transaction without designating separate agents, this is considered:Agency
Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Math Concepts
Study This Topic
Practice More Alaska Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Alaska Quiz →