Under the common-law measure of damages, which of the following best states the typical monetary remedy available to a seller when a buyer breaches an executory contract for the purchase of real property, assuming the contract does not contain a valid liquidated-damages clause and the seller does not elect specific performance?
The profit (if any) the seller realizes when the property is later resold at a higher price.
Punitive damages in an amount sufficient to deter future breaches by buyers in the jurisdiction.
Return of any earnest-money deposit to the seller, but no additional recovery.
The difference between the contract price and the property's fair-market value at the time of breach, plus any incidental damages.
When a buyer repudiates or otherwise breaches a land-sale contract, the seller may recover expectation damages designed to put the seller in the position she would have occupied had the contract been performed. The majority rule measures those damages as the difference between the contract price and the property's fair-market value at the time of breach, plus any proven incidental or consequential damages (such as reasonable resale costs). If the market value equals or exceeds the contract price, this measure yields zero damages. Other remedies-such as retaining the earnest-money deposit as liquidated damages or suing for specific performance-are available only if expressly agreed upon or elected instead of damages.
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What are the basic principles of contract law that apply to real estate transactions?
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What is meant by 'fair market value' in the context of a real estate breach?
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Can you explain the concept of specific performance as a remedy in real estate contracts?