Contracts
Under New York law, 'liquidated damages' in a real estate contract are:
ADamages calculated by a court after a breach
BA pre-agreed amount (typically the deposit) that represents the parties' estimate of actual damages in the event of a specific breach✓ Correct
CDamages available only in commercial lease disputes
DA penalty that can be recovered in addition to actual damages
Explanation
A liquidated damages clause pre-determines the amount of damages for a specific type of breach. In New York real estate contracts, the earnest money deposit typically serves as liquidated damages for the buyer's default — the seller retains the deposit as full compensation. Liquidated damages clauses are enforceable in New York if the amount is a reasonable estimate of actual damages (not a penalty).
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