Contracts, 12% of the examination
Liquidated damages
A contract clause fixing in advance the amount recoverable on breach.
On a one-to-four unit residential property the buyer intends to occupy, liquidated damages are presumed valid up to 3% of the purchase price. The clause must be in at least ten-point bold type and separately signed or initialled by both parties. Anything above 3% requires the seller to prove it was reasonable.
See it in a question
One question from Contracts, so the term lands in the context the exam uses it in.
A seller receives an offer and returns it signed, having changed the closing date. What has the seller legally done?
Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.