Defendant buyer challenged a judgment of the Municipal Court of the City of San Diego (California), which found for plaintiff seller in the seller’s action to recover liquidated damages for the buyer’s violation of an option agreement
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The contract between the parties included an option agreement which allowed the seller to repurchase the car it sold the buyer within six months of the sale, and for the buyer to pay $ 500 in liquidated damages if he resold the car before the option expired. The buyer sold the car before the option expired and the seller brought an action to recover the liquidated damages. The trial court found for the seller. On appeal, the court reversed the judgment of the trial court. The court found that the trial court refused to permit the buyer to prove that the actual damage was less than the liquidated damage clause provided for or that there was no damage at all. The court held that even if the seller pleaded a cause of action for liquidated damages and established a prima facie case that he was entitled to them, the buyer was entitled to have rebutted or met the presumption that the amount of damages equaled the amount in the liquidated damages clause. The court also held that the option agreement was not contrary to public policy because the restriction on alienability it imposed was reasonable and valid pursuant to Cal. Civ. Code ยง 715.
The court reversed the judgment of the trial court, which found for the seller in his action to recover liquidated damages for the buyer’s violation of an option agreement.
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