Liquidated Damages versus Penalties. The Ivanovs, who were of Russian origin, agreed to purchase the ...

Liquidated Damages versus Penalties. The Ivanovs, who were of Russian origin, agreed to purchase the Sobels' home for 300,000. A 30,000 earnest money deposit was placed in the trust account of Kotler Realty, Inc, the broker facilitating the transaction. Tiasia Buliak, one of Kotler's salespersons, negotiated the sale because she spoke fluent Russian. To facilitate the closing without the Ivanovs' having to be present, Buliak suggested they form a Florida corporation, place the cash necessary to close the sale in a corporate account, and give her authority to draw checks against it. The Ivanovs did as Buliak had suggested. Before the closing date of the sale, Buliak absconded with all of the closing money, which caused the transaction to collapse. Subsequently, because the Ivanovs had defaulted, Kotler Realty delivered the 30,000 earnest money deposit in its trust account to the Sobels. The Ivanovs then sued the Sobels, seeking to recover the 30,000. Was the clause providing that the seller could retain the earnest money if the buyer defaulted an enforceable liquidated damages clause or an unenforceable penalty clause? Discuss.

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Liquidated Damages versus Penalties. The Ivanovs, who were of Russian origin, agreed to purchase the ...

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