Contracts
In New Jersey, 'liquidated damages' in a real estate contract provide for:
AAutomatic specific performance if the buyer defaults
BA pre-agreed amount (typically the earnest money deposit) as compensation if one party defaults, instead of unlimited damages✓ Correct
CAttorney fees for the prevailing party
DPunitive damages for bad-faith breach
Explanation
A liquidated damages clause specifies in advance what compensation the non-breaching party will receive if the other party defaults. In NJ contracts, this is typically the earnest money deposit. Courts will enforce such clauses if the amount is a reasonable estimate of actual damages.
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