Default & Remedies in a Commercial Purchase Agreement
The remedies clause decides who wins if the deal breaks — and it is often deliberately asymmetric between buyer and seller.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
The default-and-remedies section says what happens if a party fails to close. It is one of the most negotiated and most asymmetric parts of a PSA, and it is where a buyer or seller can be quietly disadvantaged.
Typical structure: if the buyer defaults, the seller keeps the deposit as liquidated damages; if the seller defaults, the buyer may sue for specific performance or terminate and recover the deposit — but sellers often try to cap their exposure to return of the deposit.
Topics to check
Most PSAs make deposit forfeiture the seller’s sole remedy for a buyer default, framed as liquidated damages. A buyer wants that to be the seller’s exclusive remedy so a failed deal cannot expose it beyond the deposit; a seller may want to preserve actual damages or specific performance.
Liquidated-damages clauses are enforceable only where actual damages were difficult to estimate and the amount is a reasonable forecast, not a penalty — an issue that turns on state law and the size of the deposit.
Liquidated damages (Cornell LII Wex)Because each parcel of real estate is considered unique, courts may order specific performance — forcing the seller to convey — rather than just awarding money. A buyer wants to preserve specific performance; a seller often tries to limit the buyer to a return of the deposit (sometimes plus capped expenses).
Watch for a seller-default clause that caps the buyer’s remedy at the deposit: it lets a seller walk from a below-market deal by simply returning the buyer’s own money.
Specific performance (Cornell LII Wex)Check for notice-and-cure rights before a default is declared, and whether the closing date is "time of the essence." When time is of the essence, missing the date is itself a default with no grace period — so confirm whether reasonable extensions are available for financing, estoppels, or title cure.
Also confirm whether attorneys’ fees are recoverable by the prevailing party, which changes the economics of enforcing the contract.
Key takeaways
- Buyers: make deposit forfeiture the seller’s sole remedy for buyer default.
- Liquidated damages must be reasonable, not a penalty, to be enforced.
- Buyers: preserve specific performance; beware a deposit-only seller-default cap.
- Check notice-and-cure rights and whether time is of the essence.
- Note any prevailing-party attorneys’-fee provision.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Availability of specific performance and enforceability of liquidated-damages caps vary by state.
- Remedy outcomes depend on the exact clause and governing law; confirm with counsel.
Frequently asked questions
Can I force a seller to sell if they back out?
Possibly. Because real estate is considered unique, courts may grant specific performance — ordering the seller to convey — if the contract preserves that remedy. Many seller-friendly PSAs try to limit the buyer to a refund of the deposit instead.
What is “time is of the essence”?
It means deadlines — especially the closing date — are strict, and missing one is a default with no automatic grace period. If your contract says this, make sure you can get extensions for financing, title cure, or estoppels if needed.
If I default as the buyer, can the seller sue me for more than my deposit?
It depends on the contract. Many PSAs limit the seller to keeping the deposit as liquidated damages, but some preserve actual damages or specific performance. Confirm that deposit forfeiture is the seller’s sole remedy if that is your expectation.