Question

Knight signed a lease specifying that, if the $400-per-month rent was not received by the fifth of each month, Knight would owe the landlord $25 as liquidated damages, for every day that the rent was late. In January, Knight failed to pay the rent until the 21st of the month. The landlord insisted that Knight pay $800 because Knight owed $400 for the rent and $400 in late charges. What is most likely to be a court’s ruling?

Answer 1

If the court determines that the $25 per day late charge is excessive and not a reasonable estimate, it might rule in favor of Knight and consider the $400 in late charges invalid.

Step-by-step explanation:

In this case, Knight signed a lease agreement which specified that if the rent was not received by the fifth of each month, Knight would owe the landlord $25 as liquidated damages for every day the rent was late. In January, Knight failed to pay the rent until the 21st of the month.

The landlord insisted that Knight pay $800, which includes $400 for the rent and $400 in late charges.

However, it is important to note that liquidated damages in a lease agreement must be a reasonable estimate of actual damages suffered by the landlord due to late payment.

If the court determines that the $25 per day late charge is excessive and not a reasonable estimate, it might rule in favor of Knight and consider the $400 in late charges invalid.

Answer 2

Answer and Explanation: From the given case/scenario we can state that the court is most likely to rule that these late charges or fine tends to constitute a penalty since they are excessive . The law that tends to govern most of the penalties is considered to be a slight exception to the general rule of law which tends to preserve the freedom of contract,and thus allowing the parties wide freedom in order to agree to the terms and points of contract.