A recent court case in Southern California dealt with a home sale in 2005. The purchase contract stated that the deposit was non-refundable and the liquidated damages part of the contract was not initialed by each party. The Buyer ended up canceling the contract but the Seller was able to sell the property for $1 Million more than the original offer (the first price was $14M but ended up selling it for $15 Million to another Buyer).
The Seller’s were keeping the $620,000 deposit and the Buyer sued to get it back. The court ruled that since there were no damages as a result from the first Buyer canceling the contract, the Seller couldn’t keep the deposit.
If you’re interested, read more about it here.