Question

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

Answer 1

Answer: Cohen is correct

Explanation:

The contract between Cohen and Windsor stipulated in clear terms that if Windsor breaches the contract, the deposit would be kept by Cohen as liquidated damages.

The contract to the best of our knowledge, did not add an exception to this breach for lack of financing and so when Windsor's expected financing fell through and she breached the contract, there was nothing to void this clause in the contract which means that Cohen was well within his rights to keep the deposit.