September 11th, 2017 at 11:30 am
Answer: Probably not. The liquidated damages clause in the RPA states that, if the buyer defaults, the seller “shall retain, as liquidated damages, the deposit actually paid.” This contractual language tracks the liquidated damages law which generally allows liquidated damages only to the extent that “payment is actually made.” But in this situation, no deposit has been paid.
Under these circumstances, the seller may elect to pursue a legal claim against the buyer for breach of contract. It is possible that a judge or arbitrator will overlook the fact that no deposit has actually been paid. That possibility is greater if the seller can show that the buyer has acted in bad faith or dealt unfairly with the seller. Also, even if the seller is unable to recover the amount of the deposit as liquidated damages, the seller should still be able to recover any actual damages suffered as a result of the buyer’s default.
Lesson: This scenario serves as a good reminder for listing agents to make sure that buyers promptly deliver their deposit into escrow. Otherwise, the seller should consider the merits of serving a Notice to Buyer to Perform (NBP) and cancelling the agreement as the seller deems appropriate.
-In remembrance of September 11, 2001: We will always honor the victims and persevere.
Copyright© 2017 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of September 11, 2017. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.
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