top of page
  • Writer's picturePaul Peter Nicolai

Contract Liquidated Damages Dumped

Updated: Jun 17, 2022

A plaintiff sued to enforce a contract that said that if the other side did business with any of its customers in five years, the offending party would pay the other 25% of the revenue from those customers. The court dismissed the case.


Why This Is Important… This kind of contract clause is a liquidated damages clause. The law says that a liquidated damages provision cannot be a penalty. It has to substitute for actual damages where actual damages are not knowable when the contract is written. It has to base the liquidated damages on an approximation of actual damages to be enforceable. Because this provision had nothing to do with the potential damages suffered, it was unenforceable as a penalty.


Recent Posts

See All

Non-Contract Claims Allowed Despite Contract

A plaintiff sued for contract damages, unjust enrichment, and what is called a quasi-contract concerning services he provided to a company. The company argued the parties had a fully integrated indepe

Land Sale Contract Overridden

A person sold a piece of land with a side agreement that said that, under certain circumstances, they could repurchase the property at a fixed price. Later, through an e-mail exchange, a different dea

Comments


bottom of page