Liquidated Damages: Protecting Your Interests in Real Estate Contracts
When a real estate deal falters, liquidated damages provide a way for the injured party to be compensated. These pre-agreed sums are detailed within the initial purchase contract, ensuring both parties understand the financial consequences of a breached agreement.
By law, liquidated damages can only be used to compensate for actual losses suffered, not to penalize the party at fault. If the initial contract does not specify an amount for liquidated damages, the compensation becomes ‘at large,’ meaning it will be determined by a court.
For example: If you plan to rent a storefront to open a business, but the landlord backs out at the last minute, a liquidated damages clause in the contract could cover your potential lost sales.
By including a liquidated damages clause in your contract, you ensure there’s a clear, agreed-upon solution in case the deal collapses. This not only provides peace of mind but also streamlines legal proceedings if disputes arise.
Related Terms: breach of contract, damages clause, real estate law, compensation clauses, legal disputes.
