## Facts

- Purchasers contracted in 2003 to buy a luxury condominium unit and three parking spaces in a Chicago high-rise for $2,188,464.
- The purchasers paid 15% earnest money ($328,269.60) plus interest under an agreement anticipating a closing in 2008.
- The agreement provided that upon purchaser default the seller could (a) terminate and retain the earnest money and interest as liquidated damages, or (b) pursue other remedies such as specific performance or damages.
- The seller declared the purchasers in default, terminated the agreement, resold the unit to a third party, and retained the earnest money and interest.
- Purchasers alleged the agreement remained in effect at the time of resale and that retaining the deposit while reselling was improper.
- Purchasers sued for declaratory relief and asserted breach of contract, unjust enrichment, and conversion, also alleging the liquidated-damages clause was an unenforceable penalty.
- The circuit court dismissed the first amended complaint under 735 Ill. Comp. Stat. 5/2-615 for failure to state a claim; purchasers appealed.

## Issues

1. Whether the purchasers stated a claim that the purchase agreement remained in force when the seller resold the unit and retained the earnest money and interest.
2. Whether the purchasers stated claims for breach of contract, unjust enrichment, or conversion based on the seller’s retention of the earnest money and resale of the unit.
3. Whether the liquidated-damages provision was unenforceable as a penalty because it did not state a fixed dollar amount and allegedly allowed the seller to retain the deposit and resell the property.

## Decision

- The appellate court affirmed dismissal of the complaint.
- On de novo review of the pleadings, the court held the agreement and attached exhibits foreclosed the claim that the contract remained in effect after termination for default.
- The court held the seller’s retention of the earnest money and interest was authorized by the contractual remedies provision, defeating breach of contract.
- The court held unjust enrichment and conversion were not viable where an express contract governed the parties’ rights to the earnest money.
- The court upheld the liquidated-damages clause as enforceable and not a penalty.

## Legal Principles

- On a motion to dismiss for failure to state a claim, well-pleaded facts are accepted as true, but legal conclusions are not; contract exhibits attached to a complaint control over inconsistent allegations.
- A liquidated-damages provision is enforceable if actual damages are difficult to measure at contracting and the stipulated amount is a reasonable forecast of probable loss rather than grossly disproportionate.
- A liquidated-damages amount can be sufficiently definite when tied to a defined percentage of the purchase price plus interest; it need not be a single fixed dollar figure.
- Enforceability of liquidated damages is assessed at the time of contracting; later resale of the property does not, by itself, convert a reasonable liquidated-damages clause into an unlawful penalty.
- Where an express contract authorizes retention of earnest money upon default, restitution (unjust enrichment) and tort (conversion) theories based on retaining those funds generally fail.

## Conclusion

The court affirmed dismissal because the contract permitted termination for purchaser default and retention of the 15% earnest-money deposit and interest as liquidated damages, and the purchasers’ contract, restitution, and conversion theories did not plausibly allege unauthorized or wrongful retention under the agreement.


Karimi v. 401 N. Wabash Venture, LLC, 952 N.E.2d 1278 (Ill. App. Ct. 1st Dist. 2011)