Contracts
A Mississippi real estate contract contains a 'liquidated damages' clause stating the seller may keep the earnest money if the buyer defaults. This clause is enforceable when:
AThe seller can prove actual damages exceeding the earnest money amount
BThe earnest money amount represents a reasonable estimate of anticipated damages, not a penalty✓ Correct
CThe contract was negotiated by an attorney
DThe amount equals exactly 10% of the purchase price
Explanation
Liquidated damages clauses are enforceable in Mississippi when: (1) actual damages are difficult to calculate at the time of contracting, and (2) the amount represents a reasonable pre-estimate of anticipated damages, not a penalty. Courts may refuse to enforce provisions that are disproportionate to actual damages.
Related Mississippi Contracts Questions
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