Contracts
In Montana, a liquidated damages clause in a purchase agreement specifies that if the buyer defaults:
AThe seller may sue for any amount of actual damages
BThe seller retains the earnest money as the agreed-upon remedy in lieu of other damages✓ Correct
CThe buyer forfeits all purchase costs including inspection fees
DThe court will determine damages at trial
Explanation
A liquidated damages clause pre-specifies the remedy for a buyer's default—typically the seller retains the earnest money deposit. By agreeing to this clause, both parties accept this amount as the full measure of damages, limiting the seller's recovery but also limiting the buyer's exposure.
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