## Facts

- The Heikkilas sold a 5,920-acre ranch to the Carvers under a January 2, 1979 contract for deed for $592,000, with allocations including real estate, a house, and a partial mineral-interest purchase; the sellers reserved a 90% mineral interest and development rights.
- The Carvers agreed to assume a state land contract debt, make a substantial down payment, and pay annual installments of principal and interest of $41,202 for 19 years, with a higher interest rate on default until cured.
- The contract included a default provision requiring notice and a 60-day cure period; if uncured, the sellers could accelerate the balance, retake possession, and require reassignment or conveyances back to the sellers.
- The contract expressly characterized the remedy as liquidated damages, stating actual damages would be difficult to estimate and that the buyers’ equity at default would constitute the sellers’ damages.
- Russell Carver had real-estate experience, reviewed the agreement, and participated in negotiating the amount of liability addressed by the liquidated-damages/forfeiture provision.
- The Carvers were late on an installment payment; the Heikkilas served notice of default and the 60-day opportunity to cure, but the Carvers did not bring the contract current within that period.
- By the time suit was filed, the Carvers had paid $319,345.47 and made approximately $400,000 in improvements to the ranch.
- The trial court declared the Carvers in default, enforced the liquidated-damages/forfeiture clause, returned the ranch to the Heikkilas, and allowed the Heikkilas to retain all payments and improvements.

## Issues

1. Whether the contract-for-deed provision allowing the sellers to retain the buyers’ payments and improvements upon uncured default was an unenforceable penalty rather than valid liquidated damages.
2. Whether enforcement of the provision was unconscionable or otherwise inequitable such that the buyers were entitled to equitable relief from forfeiture.

## Decision

- The Supreme Court of South Dakota affirmed the circuit court judgment.
- The court held the clause was a valid liquidated-damages provision and not a penalty.
- The court rejected the claim that enforcement was unconscionable or barred by equity, despite the magnitude of the forfeiture, because the parties negotiated at arm’s length and the contract provided notice and an opportunity to cure.

## Legal Principles

- A liquidated-damages clause is enforceable when, at the time of contracting, actual damages from breach are difficult to estimate and the stipulated amount is a reasonable measure of anticipated harm rather than punishment.
- In long-term installment real-estate contracts, damages from default (including market changes, carrying costs, and resale risks) may be sufficiently uncertain to support liquidated damages.
- Courts give substantial weight to clear contractual language and arm’s-length bargaining between sophisticated parties when assessing whether a stipulated remedy is a penalty or unconscionable.
- Equitable relief from forfeiture is discretionary and is not granted merely because a bargained-for remedy produces a harsh result after the buyer fails to cure within the contract’s specified period.

## Conclusion

The court enforced the contract’s liquidated-damages forfeiture remedy, holding that the sellers could retake the ranch and retain the buyers’ payments and improvements after an uncured default because the parties knowingly allocated the risk of breach in a setting where actual damages were difficult to quantify.


Heikkila v. Carver, 378 N.W.2d 214 (S.D. 1985)