13-1. Liquidated Damages. Carnack contracts to sell his house and lot to Willard for $100,000. The terms of the contract call for Willard to make a deposit of 10 percent of the purchase price as a down payment. The terms further stipulate that if the buyer breaches the contract, Carnack will retain the deposit as liquidated damages. Willard makes the deposit, but because her expected financing of the $90,000 balance falls through, she breaches the contract. Two weeks later, Carnack sells the house and lot to Balkova for $105,000. Willard demands her $10,000 back, but Carnack refuses, claiming that Willard’s breach and the contract terms entitle him to keep the deposit. Discuss who is correct.

In this case, the clause of a contract stipulates that, in the event of a potential breaches or infringements of the contract, a certain percentage of the dollar is to be payed. However, liquid is specified, deposited, or fixed. Liquidated judgments are therefore distinguished from fines. A fine shall be incurred in case of a default or breach of a contract which shall penalize the infringement by the party. The fine shall be paid. Provisions for liquidated losses usually often apply. However the clause covering the amount will not be applied, and recapture will not be limited to actual penalties, where, however, the courts think that includes a fine.

When a legal rule needs to be settled on liquidated damages or fines, the courts will address these two issues. The first question is: was it clear that in case of an violation it would be impossible to measure damages before the deal has been concluded?

Second, I would like to ask:

Was the figure a fair and not unreasonable calculation of damages? The deal will still be restitution in this case. The bond that recovers goods, properties or funds previously transferred to each other. If the goods or properties may be recovered, they have to be recovered. Now if the property or product is taken, it is appropriate to render restitution in an quantity of equal dollars. Restitution may be appropriate, though, when a contract is terminated.