Enforceability Status
Arkansas courts generally enforce per-diem closing penalty provisions when structured as reasonable liquidated damages. Arkansas follows established common law principles and the state's Deceptive Trade Practices Act provides additional consumer protections.
Legal Analysis
Arkansas courts evaluate daily closing penalties under the state's liquidated damages framework. A per-diem charge is enforceable if the amount was a reasonable estimate of anticipated damages at the time of contracting and actual damages would be difficult to calculate. Arkansas follows principles consistent with the Restatement (Second) of Contracts Section 356.
Arkansas's new construction markets in the Little Rock, Northwest Arkansas (Bentonville/Fayetteville), and Fort Smith areas feature moderate use of per-diem closing penalties. Daily rates typically range from $50 to $150. Courts assess whether these amounts reflect actual builder holding costs.
The Arkansas Deceptive Trade Practices Act (Ark. Code Ann. Section 4-88-107) prohibits deceptive and unconscionable trade practices. Builders who fail to clearly disclose per-diem penalty provisions or who misrepresent closing flexibility may face liability under this statute.
Arkansas does not have specific legislation governing closing penalties in residential construction. Enforceability is determined by general contract law. Arkansas courts generally respect freedom of contract and will uphold reasonable per-diem provisions.
Relevant Arkansas Law
Prohibits deceptive and unconscionable trade practices. Applicable when builders impose undisclosed or misleading per-diem closing penalty terms.
Arkansas courts follow the Restatement standard requiring that liquidated damages be a reasonable forecast of just compensation.
Governs residential contractor licensing. The Committee may consider complaints about unfair contract practices by licensed builders.
Builders in Arkansas Using This Clause
What Arkansas Buyers Should Know
- Assess the per-diem rate against Arkansas's affordable market. Arkansas's relatively low home prices mean builder carrying costs are modest. Ensure the daily penalty rate is proportionate to actual costs rather than inflated.
- Negotiate mutual delay provisions. Request a reciprocal per-diem credit if the builder fails to complete the home on time. One-sided penalty structures should be challenged during negotiation.
- Request a grace period before penalties begin. Ask for a 7- to 14-day buffer after the scheduled closing date before per-diem charges start accruing. Minor lender delays are common.
- Document all timeline communications. Keep written records of all statements from the builder's sales team about closing dates and flexibility. The Arkansas Deceptive Trade Practices Act may provide recourse if representations contradict the written penalty terms.