Which of the following statements is true regarding breaches of sales contracts?

In the context of breaches of sales contracts, it is important to understand the concepts of earnest money and liquidated damages.

Earnest money is typically a deposit made by the buyer to demonstrate their commitment to the transaction. In the event of a breach of contract, this earnest money can indeed be treated as liquidated damages, which are pre-determined amounts agreed upon in advance that compensate the injured party in the event of a breach.

Liquidated damages serve to provide a clear and agreed-upon remedy, which reduces disputes over the extent of damages in case of a breach. Both statements highlight essential concepts—the role of earnest money in a breach scenario and the definition of liquidated damages.

Thus, since both statements accurately reflect the principles surrounding contracts and breaches within real estate transactions, they collectively reinforce the truth of the answer chosen.