A "liquidated damages clause" in a purchase agreement sets a maximum dollar amount that a seller can recover from a buyer if the buyer does not fulfill their part of the agreement. The law limits this amount to 3% of the purchase price. Without this clause, the buyer could be responsible for paying the full amount of money that the seller lost because of the buyer's breach.
These are questions that the above text answers:
1. What is a liquidated damages clause in a purchase agreement?
2. What is the purpose of a liquidated damages clause?
3. How does a liquidated damages clause benefit the seller in a purchase agreement?
4. What happens if a purchase agreement does not include a liquidated damages clause?
5. What is the role of a liquidated damages clause in avoiding unnecessary losses?
6. How does a liquidated damages clause protect the buyer in a purchase agreement?
7. What part of the purchase agreement does a liquidated damages clause pertain to?