Enforceability Status
Louisiana, as a civil law jurisdiction, addresses penalty clauses through its Civil Code rather than common law. Under La. Civ. Code art. 2005, stipulated damages provisions are enforceable, and courts may modify the amount if it is manifestly unreasonable. Per-diem closing penalties structured as stipulated damages are generally upheld when the amount is proportionate.
Legal Analysis
Louisiana is unique among U.S. states as a civil law jurisdiction. Penalty clauses, known as stipulated damages (clause penale), are governed by La. Civ. Code art. 2005-2012. Unlike common law states, Louisiana does not automatically void penalty clauses. Instead, under La. Civ. Code art. 2012, courts have the authority to modify a stipulated damages amount if it is so manifestly unreasonable as to be against public policy.
This approach means that per-diem closing penalties are generally enforceable in Louisiana, but the court retains discretion to reduce the amount if it is disproportionate. This provides a safety valve for buyers facing excessive daily charges while still allowing builders to include reasonable per-diem provisions.
The Louisiana Unfair Trade Practices and Consumer Protection Law (La. Rev. Stat. Section 51:1401 et seq.) provides additional protections against unfair or deceptive practices in trade and commerce. Builders who fail to disclose per-diem penalty terms or who misrepresent closing flexibility may face claims under this statute.
Louisiana's new construction markets in the New Orleans, Baton Rouge, and Lafayette areas feature moderate use of per-diem closing penalties. Daily rates typically range from $75 to $175. The civil law framework provides buyers with the unique right to petition for judicial reduction of excessive penalty amounts.
Relevant Louisiana Law
Governs stipulated damages (penalty clauses) in Louisiana. Courts may modify the amount if manifestly unreasonable. Provides the primary framework for evaluating per-diem closing penalties.
Prohibits unfair or deceptive practices in trade and commerce. Applicable when builders impose undisclosed or misleading per-diem closing penalty terms.
Provides warranty protections for new home buyers. Relevant context when closing delays relate to construction quality issues.
Builders in Louisiana Using This Clause
What Louisiana Buyers Should Know
- Understand Louisiana's unique civil law approach to penalty clauses. Unlike most states, Louisiana does not automatically void penalty clauses. However, courts can reduce a stipulated damages amount under La. Civ. Code art. 2012 if it is manifestly unreasonable. This provides a judicial safety valve for buyers facing excessive per-diem charges.
- Request a cost breakdown justifying the per-diem rate. Ask the builder to document the specific daily costs that justify the penalty amount. While Louisiana courts have discretion to modify excessive amounts, documenting the disparity between the penalty and actual costs strengthens any petition for reduction.
- Negotiate mutual stipulated damages for both parties. Request that the builder also be subject to a per-diem stipulated damages provision if the home is not completed by the contractual delivery date. Louisiana's civil law tradition recognizes the reciprocal nature of contractual obligations.
- Consult a Louisiana attorney familiar with civil code provisions. Louisiana's unique civil law system differs significantly from other states. An attorney experienced with Louisiana contract law can evaluate per-diem penalty terms under the Civil Code and advise on the likelihood of judicial modification.