Metro Holding Company agrees to sell a vacant lot to New Town Property LLC. The contract provides that if Metro does not close the deal by October 15, it must pay New Town one-half of the contract price. This provision is not enforceable because it is

A) a liquidated damages clause.

B) an exculpatory clause.

C) a limitation-of-liability clause.

D) a penalty clause.

D. a penalty clause.

Explanation:

A penalty clause -

The clause is usually mentioned in some specific contracts,

The clause enables one of the party (usually the weak one), to get compensation during the breach of contract, as in most of the cases the situation get downs very costly fight between the parties, hence in order to avoid this condition, a penalty clause is usually inserted in the contract.

The penalty clause can be unenforceable, if the requirements are not fulfilled, hence need to be aware before making the contract.

Hence, from the given scenario of the question,

The correct option is, D) a penalty clause.