Liquidated Damages
An amount the parties agree in advance that one will keep or pay if the other defaults, such as retained earnest money.
Quick flashcard
What does Liquidated Damages mean on the Texas real estate exam?
Answer: An amount the parties agree in advance that one will keep or pay if the other defaults, such as retained earnest money.
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Liquidated Damages definition
Liquidated damages are a sum the parties set in the contract ahead of time as the measure of damages if one party defaults. In real estate, a contract often lets the seller keep the buyer's earnest money as liquidated damages if the buyer defaults.
Because the amount is agreed in advance, the wronged party does not have to prove the actual loss.
Source basis
Definition checked against the official sources below on .
On the exam
Exam trap
Tested in
Contracts & Agency (16 of 80 National)
From definition to recall
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