## Facts

- A lender-owned 65-unit condominium project in Bullhead City, Arizona was offered for sale.
- In April 1988, John and Nancy Rampello agreed in writing to purchase the project for $4.7 million.
- The contract required $290,000 as an earnest-money/down-payment deposit and stated that, if closing failed due to the buyers’ default, $290,000 would be the seller’s liquidated damages.
- John Rampello tendered checks totaling $290,000; the checks were dishonored for insufficient funds.
- The buyers attempted to rescind; the seller treated the failure to fund/close as a default and later resold units over time.
- The seller presented evidence that damages from a failed sale of an entire condominium project were difficult to quantify at the time of contracting (e.g., lost opportunities while in escrow, market impact from a failed sale, carrying costs, depreciation, and market fluctuation).
- By the summary-judgment stage, the seller’s provable actual damages (excluding certain overhead/administrative expenses) were approximately $77,500, and many units had been resold.
- The buyers contended the $290,000 clause was an unenforceable penalty, particularly given the later resale and the lower provable actual damages.

## Issues

1. Whether the $290,000 stipulated-damages term functioned as enforceable liquidated damages or an unenforceable penalty.
2. Whether later events (resale of units and lower provable actual damages) rendered the stipulated amount unreasonable and therefore unenforceable.

## Decision

- The appellate court affirmed partial summary judgment enforcing the $290,000 liquidated-damages clause.
- The court held the clause was reasonable on its face (about 6% of the $4.7 million price) in a complex, multi-unit real-estate sale.
- The court concluded anticipated damages from a failed closing were very difficult to estimate at the time of contracting.
- The court rejected hindsight comparison to actual damages as the measure of enforceability and held later resale and lower provable losses did not convert a reasonable liquidated-damages clause into a penalty.

## Legal Principles

- A stipulated-damages clause is enforceable as liquidated damages when, at the time of contracting, (1) anticipated harm from breach is incapable or very difficult of accurate estimation, and (2) the stipulated amount is a reasonable forecast of just compensation.
- Reasonableness is assessed ex ante (at contract formation), not retrospectively based on actual damages proved after breach.
- In commercial real-estate transactions, a liquidated sum that is a modest percentage of the purchase price may be a reasonable forecast where delay, market effects, depreciation, lost opportunities, and carrying costs make damages hard to quantify.
- Subsequent mitigation or resale affecting the seller’s net loss does not, by itself, invalidate an otherwise reasonable liquidated-damages provision.
- Absent evidence of unconscionability, oppression, or overreaching, courts generally enforce negotiated risk-allocation terms in commercial contracts.

## Conclusion

The court enforced a $290,000 liquidated-damages clause in a $4.7 million condominium-project sale because damages were difficult to estimate when the contract was made and the stipulated amount was a reasonable forecast, notwithstanding later proof of lower actual damages and resale of units.


Pima Sav. & Loan Ass’n v. Rampello, 168 Ariz. 297, 812 P.2d 1115 (Ct. App. 1991)