LAW 600A Lecture Notes - Lecture 39: Liquidated Damages, Lake River, Federal Reporter
Document Summary
Liquidated damages provisions are contractual agreements to set the amount of damages at the time of contract formation. Liquidated damages provisions will be enforced so long as they do not appear to be penalties. Meaning, if the amount of actual damages is far less than the amount set in the contract, a court may strike down the liquidated damages provision as a penalty. (matter of law, not fact) Defendant contracts with plaintiff for bagging, shipping, and storage services of material. The parties" co(cid:374)tract states that defe(cid:374)da(cid:374)t would ship a certai(cid:374) a(cid:373)ou(cid:374)t of to(cid:374)s of material over 3 years to plaintiff to process. At the end of 3 years, should defendant not have met the minimum shipment requirement, defendant would pay plaintiff the difference. Defendant does not meet the target and refuses to pay the difference. Trial court awards damages to both parties stating the provision was not a penalty. Reversed, liquidated damages provision was a penalty.
