What amount of damages should Pam be allowed to collect from Louis? Explain.

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What amount of damages should Pam be allowed to collect from Louis? Explain.

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Louis leased a building to Pam for five years at a rental of $1,000 per month, Pam depositing $10,000 as security for performance of all her promises in the lease, which was to be retained by Louis in case of any breach on Pam’s part. Pam defaulted in the payment of rent for the last two months of the lease. Louis refused to return any of the deposit, claiming it as liquidated damages. Pam sued Louis to recover $8,000 (the $10,000 deposit less the amount of rent due Louis for the last two months). What amount of damages should Pam be allowed to collect from Louis? Explain.

Explanation & AnswerSolution by a verified expert

Explanation

Individual L cannot keep the whole amount of $10,000 as the liquidated damages because that amount was deposited at the time of lease contract to put as the penalty. The non payment of rent for two months is not a damage, so the amount could not be considered to be liquidated damage. Individual L can keep $2000 as rent and should return $8000 to Individual P.

Verified Answer

Individual P would be eligible to recover $8000 from Individual L because $10,000 was deposited to be levied as a penalty in case of any default by Individual P, and the nonpayment of the rent cannot be claimed as liquidated damages.

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