Metro Facilities, Inc., contracts to sell a parking lot to Nouveau Property Company. The contract provides that if Metro does not close the deal by September 15, it must pay Nouveau one-half of the contract price. This provision is not enforceable because it is

Question

Social Studies

Madden

20 September, 02:32

Metro Facilities, Inc., contracts to sell a parking lot to Nouveau Property Company. The contract provides that if Metro does not close the deal by September 15, it must pay Nouveau one-half of the contract price. This provision is not enforceable because it is

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Answers (1)

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Lawrence Beck · Answer 1

A penalty clause is a correct answer to this question.

Explanation:

A penalty clause differs from a clause on liquidated damages by not being tied to an estimate of potential actual damages. A provision stipulating an excessive monetary fee against a principal debtor in an agreement.

Courts usually do not impose such a provision, but may impose liquidated liability provisions when they provide a reasonable estimate of real damages. So penalty clause is the right answer.