The Nonrefundable Deposit - Not!
September 2010
For many years, a nonrefundable escrow deposit has been a standard part of real estate transactions. But recent case law calls that practice into question.
General Credit
1. In Kuish v. Smith the court outlawed "nonrefundable" deposits in real estate transactions. True False
2. A buyer's deposit may be nonrefundable in a falling market to the extent that the seller is able to establish actual damages. True False
3. A contractual provision that permits the forfeiture of money or property without regard to actual damages suffered constitutes an unenforceable penalty. True False
4. General damages, consequential damages, and interest are recoverable under Civil Cove section 3307. True False
5. If the buyer breaches a purchase agreement, the seller is entitled to general damages if the contract price exceeds the value of the property. True False
6. To be awarded consequential damages, a seller need only show that such damages were foreseeable. True False
7. A court may award an injured seller prejudgment interest on general damages from the date of the buyer's breach. True False
8. If the parties freely and voluntarily agree to a liquidated damages clause, the courts will always resepct their agreement. True False
9. A liquidated damages clause lets the parties know in advance the extent of liability in the event of a breach. True False
10. To recover liquidated damages, a seller must first establish actual damages. True False
11. A liquidated damages clause is enforceable only in a declinig real estate market. True False
12. A liquidated damages clause is valid unless an opposing party demonstrates that the clause was "unreasonable" based on all information presently known. True False
13. In residential transactions, a liquidated damages clause that does not exceed 3 percent of the purchase price is presumptively valid. True False
14. To be enforceable, a liquidated damages clause must be signed or initialed by both the buyer and the seller. True False
15. A liquidated damages clause must be set out in at least 12-point bold type or 14-point bold contrasting red type. True False
16. In a contract for an option to purchase a piece of real estate, the prospective buyer is called the optionee. True False
17. If the optionee does not elect to purchase the property within the time limits of the option, the consideration paid by the optionee is forfeited to the seller. True False
18. To recover the optionee's consideration, the seller of the property must establish that there has been a breach of contract. True False
19. Under California law, consideration for an option to purchase real estate may not exceed 3 percent of the purchase price. True False
20. A recorded option to purchse real estate may cloud title if the transaction is not consummated. True False
HOW TO RECEIVE ONE HOUR OF MCLE CREDIT
Answer the test questions above, choosing the one best answer
to each question. For timely processing, print or type your
name/address/bar number below. Mail this page and a $35 check made payable to CALIFORNIA LAWYER to:

 California Lawyer/MCLE
P.O. Box 54026
Los Angeles, CA 90054-0026
name (required)


bar number (required)


law firm, company, or organization


address


city, state, zip


date (required)


practice area


phone


email


please check here if this is a new address


Please click here to close this window