Contracts
Liquidated damages in an Iowa real estate purchase agreement typically refers to:
AThe court's award of punitive damages for fraud
BA pre-agreed amount (often the earnest money) the non-breaching party may retain as compensation if the other party defaults✓ Correct
CThe state's fine for unlicensed activity
DThe lender's prepayment penalty
Explanation
A liquidated damages clause specifies in advance the amount of damages (typically the earnest money deposit) that the non-breaching party may retain if the other party defaults on the contract. It avoids the need for the non-breaching party to prove actual damages.
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