John and Pamela Kelly (plaintiffs) contracted to buy property from Steven and Merrill Marx (defendants) for $355,000. The Kellys paid the Marxes a total deposit of $17,750. The purchase and sale agreement contained a liquidated-damages clause, stating that if the Kellys failed to perform, the Marxes could keep the deposit. The Kellys, unable to sell their house, breached the agreement. The Kellys brought suit to recover their deposit. Meanwhile, the Marxes sold their property to a third party for $360,000. The superior court granted the Marxes’ motion for summary judgment. The appeals court reversed, finding that the liquidated-damages clause would amount to a penalty because the Marxes suffered no actual loss. The Massachusetts Supreme Judicial Court granted review.