Mr.
and Mrs. Vines contract to buy a condo in Orchard Hill.They paid a $7880 deposit
(10%).They did not buy the
condo because Mr. Vines was transferred to New Jersey.A clause in the contract said that
the deposit was forfeit if the sale did not go through (a liquidated
damages clause).Vines sued for their deposit back.
Vines
argued that, due to an increasing housing market, the house was now worth
$80k more to Orchard Hill since the Vines contract fell through.They argued that the 10% estimate
was not well thought out or reasonable.
Orchard
Hill demurred.A demure means that they agree that everything the
plaintiff said is true.However, even though everything they said was true, we should still
win.They did not argue facts,
only the law.
Trial
Court ruled that Orchard Hill had to give back the deposit, irregardless
of the clause in the contract.
Appellate
Court overturned the decision and remanded it back to the Trial Court.
Appellate
Court found that there was no loss to the non-breaching party.Based on benefit of the bargain, there is really nothing to recover.To not give the money back is to
punish the Vines.The Vines partially
performed, which should theoretically
count more than someone who doesn't perform at all.
The
Vines are in a worse off place that someone who completely breached and
never made the down payment.Should partial performance be punished more than complete
non-performance?
Appellate
Court found that this is really an efficient breach.Both parties are better off that the contract failed, so what's
the problem?
If
the damages were known and $0, then why should a liquidated damages
clause be in effect?
However,
Appellate Court believed that Vines' argument that the price had gone up
was not valid, because the time to measure the seller's damages is at the
time of the breach, not the time after the breach occurred.
Appellate
Court found that if Vines was not happy with Orchard Hills claims that
the deposit was equal to their damages, it is Vines' responsibility to
suggest what Orchard Hills' actual loss was and compensate for that.Orchard Hill did sustain some loss do to Vines' breach, and they are
entitled to recover for that amount.
One
big question with this case is whether the breaching party (Vines) can sue
for recovery for a contract they
breached!
