Contracts
A Florida real estate contract contains a 'liquidated damages' clause providing that the seller may retain the earnest money deposit as damages if the buyer defaults. For this clause to be enforceable:
AThe deposit must equal exactly 10% of the purchase price
BThe amount must represent a reasonable estimate of actual damages, not a penalty✓ Correct
CThe buyer must have been advised by an attorney
DThe clause must be approved by FREC
Explanation
A liquidated damages clause is enforceable in Florida if: (1) actual damages would be difficult to ascertain, and (2) the agreed amount is a reasonable estimate of probable damages, not a penalty. If the deposit is disproportionate to actual damages (too high), Florida courts may find it to be an unenforceable penalty clause rather than legitimate liquidated damages.
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