earnest money considered ___ damages; damages agreed to __ ___.
liquidated – in advance
Earnest money is considered as liquidated damages; damages agreed to in advance.
Liquidated damages refer to a specific amount of money agreed upon by parties to a contract, which will be awarded to the non-breaching party in case of a breach by the other party. In the context of real estate transactions, earnest money serves as a form of liquidated damages, as it is an initial deposit made by the buyer to demonstrate their commitment to the purchase. If the buyer breaches the contract, the seller may retain the earnest money as liquidated damages.
In summary, earnest money serves both as a deposit and as a form of liquidated damages. It is a sum of money paid by the buyer to the seller as a show of good faith, indicating that they are serious about purchasing the property. If the buyer breaches the contract, the seller may retain the earnest money as liquidated damages.
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