Contracts
A liquidated damages clause in a California residential purchase agreement limits the seller's damages, if the buyer defaults, to:
AThe full purchase price
BThree percent of the purchase price
CThe actual damages suffered by the seller
DThe earnest money deposit only if it does not exceed 3% of the purchase price✓ Correct
Explanation
In California, for residential properties of 1-4 units, liquidated damages are limited to the buyer's deposit, provided the deposit does not exceed 3% of the purchase price. If it exceeds 3%, the excess may be challenged.
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