Liquidated damages versus penalties.

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Reference no: EM132205273

Mitigation of Damages:

Liquidated Damages versus Penalties. Every homeowner in the Putnam County, Indiana, subdivision of Stardust Hills must be a member of the Stardust Hills Owners Association, Inc., and must pay annual dues of $200 for the maintenance of common areas and other community services. Under the Association’s rules, dues paid more than ten days late “shall bear a delinquent fee at a rate of $2.00 per day.” Phyllis Gaddis owned a Stardust Hills lot on which she failed to pay the dues. Late fees began to accrue. Nearly two months later, the Association filed a suit in an Indiana state court to collect the unpaid dues and the late fees. Gaddis argued in response that the delinquent fee was an unenforceable penalty. [Gaddis v. Stardust Hills Owners Association, Inc., 804 N.E.2d 231 (Ind.App. 2004)]

1. What questions should be considered in determining the status of this fee?

2. Should the Association’s rule regarding assessment of the fee be enforced? Explain.

Reference no: EM132205273

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