Contracts
A Maryland purchase contract provides for 'liquidated damages' of the earnest money if the buyer defaults. This means the parties have agreed that:
AThe seller may seek unlimited damages in court
BThe earnest money represents a pre-agreed reasonable estimate of the seller's actual damages for buyer default✓ Correct
CThe buyer automatically wins any dispute
DNo other remedy is available to either party
Explanation
A liquidated damages clause pre-establishes the amount of damages payable upon default, providing certainty for both parties. The earnest money serves as the seller's remedy for buyer default.
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