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

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The provision is not enforceable because it is a penalty clause, which is a provision that imposes a punishment or a penalty for a breach of contract. Penalty clauses are unenforceable because they are intended to punish the breaching party rather than compensate the non-breaching party for its losses. In this case, the provision requires Metro to pay one-half of the contract price as a penalty if it fails to close the deal, which is not a reasonable estimate of the damages that New Town would suffer as a result of the breach.

Metro Holding Company Agrees to Sell a Vacant Lot to New