Question

Metro Facilities, Inc., contracts to sell a parking garage to Nouveau Property Company. The contract provides that if Metro does not close the deal by September 15, it must pay Nouveau one-half of the contract price. This provision is NOT enforceable because it is:

a. a liquidated damages clause

b. a waiver of breach clause

c. a limitation-of-liability clause

d. a penalty clause

Answer 1

d. a penalty clause

Step-by-step explanation:

Penalty clauses are inserted in the contract with the purpose that any of the party shall not breach the contract and shall properly do the act as per the contract.

But penalty clause shall be binding on both the parties, failure of any party shall have a penalty if there is penalty inserted in the contract for any of the party to contract.

Here the contract provides for a penalty clause to penalize the failure of Metro Facilities, and thus, the contract is just providing penalty to Metro Facilities, and thus, not enforceable clause.