Under Ohio law, a listing agreement contains a clause requiring the seller to pay a cancellation fee of $5,000 if the seller terminates the agreement early. The seller wants to cancel after two weeks. Is this cancellation fee provision enforceable?
Correct Answer
C) The enforceability depends on whether the fee is a reasonable estimate of the broker's actual damages or merely a penalty
Under Ohio contract law principles, a cancellation fee functions as a liquidated damages clause. It is enforceable only if the amount is a reasonable estimate of the broker's actual damages. If the fee is excessive and functions as a penalty, a court may find it unenforceable.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
An agency relationship created by a clear, explicit agreement between the principal and agent, either orally or in writing.
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
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