Khan v. Bakhsh, 129 Nev. 554

Background

Bakhsh owned a restaurant and the real property; the Khans agreed to purchase it. Multiple buy-sell agreements were exchanged; the parties disputed which agreement governed the sale.
The third agreement (and an accompanying $390,000 promissory note) proceeded through escrow; the Khans made no payments on that note and Bakhsh sued for the unpaid principal and interest.
The Khans asserted a subsequent fourth written agreement (purchase price $600,000) existed but the only signed copy was given to a third party (Shah) and later stolen or destroyed, allegedly by Bakhsh or his brother.
At the bench trial the district court excluded most of the Khans’ evidence: it applied the statute of frauds to treat the fourth agreement as an unwritten contract and applied the parol evidence rule to bar testimony contradicting the third agreement; the court found the Khans breached the third agreement and entered judgment for Bakhsh, including liquidated damages.
On appeal the Nevada Supreme Court reviewed whether the statute of frauds and the parol evidence rule were properly applied and whether the liquidated-damages clause was an unenforceable penalty.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether statute of frauds bars evidence of a written agreement that was later lost or destroyed	Khans: statute of frauds does not bar evidence of an allegedly written contract that was later lost/destroyed; they produced testimony and docs about the written fourth agreement	Bakhsh: no written fourth agreement; evidence is barred as an unwritten agreement by statute of frauds	Court: Reversed — statute of frauds does not bar parol/other evidence proving existence/terms of a written agreement that was subsequently lost/destroyed
Whether parol evidence rule barred testimony that the third agreement was procured by fraud or superseded by a later written agreement	Khans: extrinsic evidence is admissible to show fraud in inducement or to prove a subsequent written agreement (lost/destroyed)	Bakhsh: testimony contradicts integrated third agreement and is barred by parol evidence rule	Court: Reversed — parol evidence may be admitted to show fraud in inducement, a subsequent alteration/agreement, or a lost/destroyed writing
Whether liquidated damages clause (150% of actual damages) is enforceable	Khans: clause functions as a penalty and is unenforceable because actual damages were ascertainable	Bakhsh: clause is a valid liquidated damages provision	Court: Reversed — clause operates as a penalty (requires ascertaining actual damages then adds 150%) and is unenforceable
Remedy / disposition	Khans: seek reversal and remand for consideration of admissible evidence	Bakhsh: uphold judgment and damages award	Court: Reversed and remanded for further proceedings; district court must reconsider admissible evidence and recompute damages without the penalty liquidated-damages award

Key Cases Cited

Butler v. Lovoll, 620 P.2d 1251 (Nev. 1980) (Nevada statute of frauds bars enforcement of oral land-sale agreements)
Lutz v. Gatlin, 590 P.2d 359 (Wash. Ct. App. 1979) (loss/destruction of a written contract does not render it "unwritten" for statute of frauds purposes)
Joseph E. Seagram & Sons, Inc. v. Shaffer, 310 F.2d 668 (10th Cir. 1962) (parol evidence admissible to prove existence and terms of a lost/destroyed written agreement)
M.C. Multi-Family Dev. v. Crestdale Assocs. Ltd., 193 P.3d 536 (Nev. 2008) (parol evidence rule exceptions: subsequent alteration and related doctrines)
Joseph F. Sanson Inv. Co. v. 268 Ltd., 795 P.2d 493 (Nev. 1990) (liquidated damages provisions are prima facie valid but must not operate as penalties)
Mason v. Fakhimi, 865 P.2d 333 (Nev. 1993) (unenforceable penalty where clause imposes disproportionate damages beyond actual loss)