Question

Read and address your opinion on the case using language from the chapter.

16.1 Liquidated Damages The Trump World Tower is a 72-story luxury condominium building constructed at 845 United Nations Plaza in Manhattan, New York. Before the building was constructed, 845 UN Limited Partnership (845 UN) began selling condominiums at the building. The condominium offering plan required a nonrefundable down payment of 25 percent of the pur- chase price. The purchase contract provided that if a purchaser defaulted and did not complete the purchase, 845 UN could keep the 25 percent down payment as liquidated damages Cem Uzan and Hakan Uzan, brothers and Turkish billionaires, each contracted to purchase two condo- minium units on the top floors of the building. Both Cem and Hakan were represented by attorneys. Over the course of two years, while the building was being constructed, the brothers paid the 25 percent nonre- fundable down payment of SS million. On September 11, 2001, before the building was complete, terrorists attacked New York City by flying two planes into the World Trade Center, the city's two tallest buildings, murdering thousands of people. Cem and Hakan sent letters to 845 UN, rescinding their purchase agreements because of the terrorist at- tack that occurred on September 11. Thus, 845 UN terminated the four purchase agreements and kept the 25 percent down payments on the four condominiums as liquidated damages. Cem and Hakan sued 845 UN, alleging that the money should be returned to them. However, 845 UN defended, arguing that the 25 percent nonrefundable down payment was an enforceable liqui- dated damages clause. Is the liquidated damage clause enforceable? Usan v. 845 UN Limited Partnership, 10 A.D.3d 230, 778 N.Y.S.2d 171, 2004 N.Y. App. Div. Lexis 8362 (Supreme Court of New York, Appellate Division, 2004)

Answer 1

In the case, Uzan vs 845 UN, liquidated damages are enforceable. According to the Lawrence rule of real estate law, there are two legal principles for the real estate transactions, namely:

1-The vendor can retain his down payment without any reference to the actual damages (such as the terrorist attack).

2-This is the parent rule and the first rule is based upon this parent rule. The parent rule states that one who breaches the contract cannot recover the value of his payment/part performance. In this case, Uzan cannot recover the down payment as they were the ones who breached the contract.

Additionally, the parties were sophisticated business parties who were represented by attorneys and they had spent a considerable amount of time in discussion with 845 UN before they executed the contract. The purchase agreement clearly had a clause that stated that the 25% down payment was a non-refundable amount and the plaintiffs had accepted for this term in the contract. The counsel who represented the plaintiff just negotiated on the amendment to the clause of payment method and not on the ‘refundable’ part. Also, it is a requirement in real estate that for luxury pre-construction condominiums, an initial down payment of 25% non-refundable amount is a default amount. Hence, it is clear from the reasons above that the plaintiffs (Uzans) cannot claim their down payment in full or in part. Thus, liquidated damages are enforceable.