Here's an engaging story inspired by a true case to answer a key question for successful business owners:

Can you agree in advance to pay a reasonable amount of money

if you break your contract?

Keep Your Commitment or Reap Your Consequences

In February 2020, just before the world turned upside down, Sam Becker thought he’d found the deal of a lifetime. He’d spent years flipping duplexes in Montclair and Hoboken, but this — six stabilized complexes in Morristown — was his first step into serious passive income.

The sellers, two brothers who ran Halcyon Holdings, weren’t amateurs either. They had lawyers, accountants, and years of experience structuring complex real estate sales. Sam’s offer was solid: fair market price, due diligence complete, and a clean contract. Both parties agreed to the usual: closing in 60 days, a $750,000 deposit held in escrow, and a simple clause — if Sam didn’t show up at closing without a valid excuse, Halcyon kept the deposit. No drama. Just consequences.

The contract even said “time is of the essence.” In lawyer-speak, that means you’d better not treat the closing date like a casual suggestion.

The Pandemic Hits

By April the pandemic was in full swing and everything felt uncertain. Renters were behind. Tenants were scared. Halcyon sent Sam a detailed email explaining how they were handling it: waiving late fees, offering payment plans, and avoiding evictions. It was a measured, humane approach. Sam replied, “Sounds reasonable.”

But just one day before closing, Sam changed his tune.

He sent an email full of sudden concerns — arguing Halcyon’s COVID policies changed the deal, claiming the business wasn’t being operated “in the ordinary course,” and asking to delay the closing.

The brothers replied plainly: “Time is of the essence. Closing is tomorrow.”

A Vanished Buyer

Sam didn’t show up.

He didn’t call. He didn’t wire funds. He simply vanished from the closing table and waited to see what would happen. What happened, of course, was Halcyon canceled the deal and demanded the $750,000 escrow as liquidated damages.

Sam sued. He claimed Halcyon had breached the contract first and said the liquidated damages clause was just a penalty in disguise and shouldn’t be enforced.

Courtroom Course Correction

At trial, the court agreed with Halcyon that Sam had breached the agreement— but then let him off the hook for the deposit. The judge ruled that the damages clause was unenforceable.

But on appeal, things swung the other way.

The appellate court saw it differently: both sides were sophisticated, well-advised, and fully aware of what they signed. The clause wasn’t an arbitrary punishment, it was a reasonable way to account for the disruption a failed closing would cause. And Sam hadn’t been blindsided. He’d been warned, reminded, and given every chance to close. The law, the court said, doesn’t step in just because you regret a deal or even because you misunderstood it

The final result: the breach stood, and Halcyon got to keep the deposit. No do-overs.

Takeaways for Business Owners

So dear business owners, remember:

When you agree to pay a reasonable amount of money if you break your contract, you should expect a court to hold you to your promise.

This story is based on a real court case, with names and details modified for clarity and confidentiality. The legal principles remain the same, providing important lessons for business owners facing similar situations

Are you wondering about any of the issues mentioned above? Please email us at info@wilkinsonlawllc.com or call (732) 410-7595 for assistance.

At Wilkinson Law, we give business owners the clarity they need to fund, grow, protect, and sell their businesses. We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.®