Question

Drew contracts to sell a house to Evan. The contract provides that if Drew does not sell the house by February 10, he must pay Evan one-half of the contract price. This provision is not enforceable because it is ________.a. a liquidated damages clause.b. a material breach.c. a mitigation of damages.d. a penalty clause.

Answer 1

Answer:

Option D is correct because a penalty clause is excessive harm mitigation charge which is written in the contract so according to the law in case of default of one party the other party must be only compensated for the damage. So in this case Evan has used a penalty clause to enforce Drew to sell him his house. If Drew wants to default then he will have to compensate for the demages to Evan due to his default.