Opinion ID: 411941
Heading Depth: 2
Heading Rank: 1

Heading: Liquidated Damages Clause

Text: 18 The purchase agreement contained the following provision: 19 $1,000.00 EARNEST MONEY 20 It is understood & Agreed that EARNEST MONEY will be held by James F. Wheeler & Associates until this transaction is concluded. EARNEST MONEY will be refunded if Sellers do not accept this agreement. Buyer will forfeit said EARNEST [sic] if buyer fails to comply with the terms and conditions of this offer or if buyer causes seller to lose money thru [sic] any action or failure on the part of the buyer. 21 Pl. Exhibit 3. The Buslees argue that this is a liquidated damages clause so that Mr. Otero was entitled to their deposit and nothing more when they breached. 22 Under New Mexico law, a clause in a real estate contract providing for a deposit of earnest money is presumed not to be a liquidated damages provision absent proof that the parties intended otherwise. Ashley v. Fearn, 64 N.M. 51, 323 P.2d 1093 (1958). A court may infer the parties' intent from unambiguous contract language, and may consider other evidence if the contract is not clear. Id. The Buslees argue that the word forfeit in this clause renders it a liquidated damages provision. We agree with the trial court that the clause is ambiguous. At trial, there was conflicting testimony about the parties' intent, and we find that there is sufficient evidence to uphold the trial court's finding that the parties did not intend the deposit to be liquidated damages.