What are Liquidated Damages?

What are liquidated damages? What's the purpose of liquidated damages in contract law? Liquidated damages are the amount in damages that is used to compensate the injured party in an event of a contract breach.

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The buyer finances a deposit that is used to show their commitment to the seller. That deposit is used as financial security to alleviate the damages done in light of the contract being breached.

This most commonly happens when the buyer backs out of the deal.

If the seller has spent money to accommodate the buyer in some capacity and the buyer becomes uninterested in the property, the seller can use the liquidated damages clause to finance their financial loss.

The deposit cannot be withdrawn from escrow without the consent of both parties.

So, the buyer and seller must both negotiate a fair disbursement of money. If they can't, then they must hire an arbitrator to settle the dispute.

Chapters:
00:00 - Intro
00:40 - Let's set the scene for when Liquidated Damages are used
03:35 - What are Liquidated Damages?
04:10 - Final Thoughts on Liquidated Damages

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READ MORE ABOUT LIQUIDATED DAMAGES:
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