Dysfunctional Real Estate Contracts

“Today’s mini-review is of ‘Dysfunctional Contracts and the Laws and Practices that Enable Them: An Empirical Analysis’, 46 Ind. L. Rev. 797 (2013), by Debra Pogrund Stark, Dr. Jessica M. Choplin, and Eileen Linnabery. Apparently, many real estate contracts limit buyers’ remedies to return of earnest money, and many courts enforce such limitations. The problem is that if a buyer’s only remedy for breach of contract is the return of earnest money, then the seller hasn’t really bound himself to anything. If the seller doesn’t want to perform, all he has to do is return the earnest money. This encourages the kind of strategic behavior that contracts are supposed to prevent …” (more)

[Kenneth Ching, ContractsProf Blog, 27 November]

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