An auto dealership sold a limited-production luxury vehicle as part of its business. It typically sold very few of the vehicles per year, but continued the business because it earned $25,000 in profit on each sale. The vehicles sold at retail for $150,000. A car buyer entered into a contract with the dealership to purchase one of these vehicles with the color scheme and options she desired, which the dealership ordered from the manufacturer. She signed a written order form and put down a $50,000 deposit on the vehicle. The form specified that, in the event that the buyer failed to purchase the vehicle, the deposit was non-refundable, representing liquidated damages that did not constitute a penalty. Later, the car buyer found a better price on an identical vehicle at another dealership, and purchased that vehicle. She demanded the return of her deposit, but the dealership refused. The dealership had difficulty selling the car, and eventually had to sell it at the discounted price of $100,000. The car buyer filed a lawsuit seeking to void the non-refundable deposit provision of the order form and seeking the return of her deposit. Is she likely to prevail

Respuesta :

No, because the deposit was fair in light of the genuine losses the dealership endured.

Although a court may take into account contract language that the liquidated damages clause is not a punishment, such a term is not deciding.

In the event of a breach without evidence of actual loss, the parties may recover liquidated damages, which are defined by the parties in the contract as a reasonable estimate of actual damages. The party seeking to revoke a contract's liquidated damages provision must demonstrate that the agreed-upon loss is so excessive as to resemble a penalty. The deposit turned out to be exactly equivalent to the dealership's real damages, even though it was double what the dealership could have calculated its damages would be in the event of a breach by the buyer.

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