Reference no: EM131473776

Question: On August 21, 1992, Miguel A. Diaz Rodriguez ("Diaz") contracted with Learjet, Inc., to purchase a model 60 aircraft. The contract called for a $250,000 deposit to be made upon execution of the contract; $750,000 to be paid on September 18; $1 million to be paid 180 days before the delivery date of July 30, 1993; and the balance to be paid on delivery. Learjet anticipated making a profit of $1.8 million on the sale to Diaz paid the $250,000 deposit on August 21, but made no further payments. At the end of September 1992, Diaz called Learjet, indicated he did not want the aircraft, and requested a return of his deposit. Learjet indicated that it would not return the deposit but, rather, would retain it as liquidated damages in accordance with the express terms of the contract, which provided for the retention of such payments in the event of breach. Learjet then contracted with Circus Circus Enterprise, Inc., for sale of the aircraft. Learjet realized a $1,887,464 profit on the sale of the aircraft to Circus Circus, which was larger than the profit it would have made on the sale to Diaz. Diaz filed suit for return of the $250,000 deposit, alleging that the retention of the deposit was an unreasonable and unenforceable penalty. At the time that Diaz breached the contract, Learjet was operating at 60 percent capacity. Learjet would have been able to accelerate its production schedule to produce more model 60 planes during any given year. How should the court rule?