Question

Metro Holding Company agrees to sell a vacant lot to New Town Property LLC. The contract provides that if Metro does not close the deal by October 15, it must pay New Town one-half of the contract price. This provision is not enforceable because it is
A) ​a liquidated damages clause.
B) ​an exculpatory clause.
C) ​a limitation-of-liability clause.
D) ​a penalty clause.

Answer 1

Answer:

D. ​a penalty clause.

Explanation:

A penalty clause -

The clause is usually mentioned in some specific contracts ,

The clause enables one of the party ( usually the weak one ) , to get compensation during the breach of contract , as in most of the cases the situation get downs very costly fight between the parties , hence in order to avoid this condition , a penalty clause is usually inserted in the contract .

The penalty clause can be unenforceable , if the requirements are not fulfilled , hence need to be aware before making the contract .

Hence , from the given scenario of the question ,

The correct option is , D) ​a penalty clause.