Contracts
Under North Dakota law, liquidated damages in a real estate contract are enforceable when:
AThe amount is set at 10% of the purchase price
BThe amount is a reasonable estimate of actual damages at the time of contracting, not a penalty✓ Correct
CThe seller demands liquidated damages at closing
DBoth parties agree at the time of breach
Explanation
Liquidated damages clauses are enforceable if the amount represents a reasonable pre-estimate of damages (not a penalty) for breach of contract at the time the contract was formed. Courts may void clauses that appear punitive rather than compensatory.
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