Contracts
What is 'liquidated damages' in a California residential real estate purchase contract?
ADamages awarded by a judge after trial
BA predetermined amount agreed upon in the contract that the buyer forfeits as the seller's sole remedy if the buyer defaults✓ Correct
CThe actual financial losses suffered by the seller
DThe buyer's down payment held in escrow
Explanation
In California residential purchase contracts, a liquidated damages clause (C.A.R. form RPA) limits the seller's remedy to retaining the buyer's deposit (up to 3% of purchase price for residential property) if the buyer defaults, providing certainty for both parties.
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