Florida Real Estate Practice Exam

Kenneth entered into a contract to sell his home to Valerie, who put down a $5,000 earnest money deposit. At the last minute, Valerie backed out of the deal and Kenneth kept the earnest deposit. This is an example of ______.

1. Accepting liquidated damages

2. Accepting partial performance

3. Suing for damages

4. Suing for specific performance

The correct answer is: Accepting liquidated damages

This is an example of accepting liquidated damages because Kenneth and Valerie had a contract that outlined the specific amount of money that would be forfeited if the deal fell through. This is also known as "earnest money" and is typically used as a way to compensate the seller for any potential losses incurred during the deal. Options B, C, and D are incorrect because they do not accurately describe the situation. Accepting partial performance would mean that Kenneth accepted something less than the full amount agreed upon in the contract, which is not the case here. Suing for damages and suing for specific performance both involve taking legal action against the other party, whereas Kenneth and Valerie have already reached a resolution with the earnest money.