HARRIS v. DAWSON

360 A.2d 706, 239 Pa. Super. 316, 1976 Pa. Super. LEXIS 1906

• Court: Superior Court of Pennsylvania
• Decided: March 29, 1976
• Docket: Appeal, 973
• Status: Published

Opinions

Opinion by

Van der Voort, J.,

This case arises on appeal from an order of the court below sustaining preliminary objections in the nature of a demurrer to plaintiffs complaint in assumpsit for damages incurred by reason of an alleged breach of contract for the sale of land. We reverse the order for the reasons hereinafter stated.

The contract price of the land was $60,000 on which a down payment of $100 was made when the contract was signed. The purchaser declined to complete the contract and refused the deed tendered to him at the time of closing. The seller thereupon sold the property to a third party for $54,000 and brought suit against the original buyer for the difference between the contract price and the ultimate selling price with adjustments for taxes and commissions. Preliminary objections were sustained and the complaint dismissed on the ground that by the terms of the contract the plaintiff was limited in recoverable damages to the down payment.

The demurrer to the cause of action is based on that portion of the sales contract which reads:

“Should the buyer fail to make settlement as herein provided, and the said time is hereby agreed to be the essence of this agreement, sum or sums paid on account are to be retained by the seller, either on account of the purchase money or as compensation for the damages and expenses he has been put to in this behalf, as the seller shall elect, and in the latter case the contract shall become null and void and all copies to be returned to the seller for cancellation.”

It is the defaulting buyer’s position that the seller precluded himself from suing for the purchase price by reselling the property and is, therefore, relegated to a claim for damages limited to the $100 down payment. We do not so read the contract. Had the seller not resold the property, there is no doubt that he could have sued for the full purchase price in an action based on specific performance, crediting the buyer with the $100 down payment: Cape May Real Estate Company v. Henderson, 231 Pa. 82, 79 A. 982 (1911). It seems to us equally clear that the seller is likewise suing for the enforcement of his contract rather than damages when he resells the property after default and then sues for the difference between the contract price and the price realized on the sale.

If the plaintiffs suit for the difference between the contract price and the price realized on resale were to be treated as an action for damages rather than an enforcement of the contract, we would be compelled to treat the $100 limitation void as a penalty in view of its unreasonableness in the light of actual damages: Unit Vending Corp. v. Tobin Enterprises, Inc., 194 Pa. Superior Ct. 470, 473, 168 A.2d 750 (1961). This court there cited with approval §339 of the Restatement of the Law of Contracts, which provides in part:

“(1) An Agreement, made in advance of breach, fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless

“(a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and

“(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.”

To the same effect, Shreve v. Brereton, 51 Pa. 175, 185-6 (1865).

Clearly a $100 down payment is not a reasonable forecast of just compensation for a refusal to complete a $60,000 purchase; furthermore, it is not difficult to make an accurate estimate of actual damage when the seller mitigates damages by a sale to a third party and sues for the difference between the amount received and the contract price.

The order of the court below is reversed, the complaint reinstated and the case remanded for further proceedings.

Jacobs, J., concurs in the result.