Contracts
In South Dakota, which of the following is true about a 'liquidated damages clause' in a real estate contract?
AIt must equal exactly 10% of the purchase price
BIt predetermines the amount of damages for breach, providing certainty for both parties✓ Correct
CIt is only enforceable in commercial transactions
DIt allows the non-breaching party to sue for unlimited damages
Explanation
A liquidated damages clause specifies in advance the compensation due if one party breaches. In real estate, this is often the earnest money. Courts will enforce it if the amount is a reasonable estimate of actual damages.
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