Limitations on damages Flashcards
liquidated damages
mutually agreed upon remedy
enforceable only when the damages contemplated from the particular breach targeted by the liquidated damages clause is difficult to estimate
and
the damages awarded does not amount to a penalty
liquidated damages issues
parties have privately agreed to set a particular damage award private ordering
liquidated damages are easy to award, channeling just look at the contract
its easy for a party to rely and predict what a damage award will be if there’s a liquidated damages clause, expectation, reliance, predictability
liquidated damages clauses provide clear evidence to support a damage award evidentiary
liquadted damages issues contd..
awards of damage based on a penalty are not economically efficient under basic understanding of the term
not all contracts with liquidated damges clauses are negotiated under ideal circumstances
liquidated damages clauses may be present an opportunity for one party to be unjustly enriched because of a non negotiable penalty for non performance
economic efficiency and economic waste- this case debate over who gets to set the appropriate recovery, courts view of economic efficiency wins.
the theory of economic waste is now a well established defense to an expectation damage award
in addition to the requirement of permanent or not fixable and temporary fixable many juridiciticitons require the difference between the cost to complete and the increased value to be grossly disproportionate.
Lasonrisa case
In the Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC case, the dispute revolved around the legality of a five percent late-fee provision in a promissory note. This note obligated a commercial borrower to pay nearly $1.4 million when it was late in submitting payments12.
Canadian Imperial Bank of Commerce had loaned Dobson Bay Club II DD, LLC and related entities $28.6 million for the purchase of commercial properties. The loan was secured by a deed of trust encumbering the properties. The promissory note stipulated that, in addition to regular interest, Dobson Bay would be required to pay default interest, collection costs, and a five percent late fee assessed on the payment amount. When Dobson Bay failed to make the required payments, La Sonrisa de Siena, LLC, which had acquired the note and deed of trust, noticed a trustee’s sale of the secured properties, claiming that Dobson Bay owed more than $30 million, including the substantial late fee1.
During the trial, the central question was whether the note constituted an enforceable liquidated damages provision. The superior court initially ruled in favor of La Sonrisa, considering the late fee enforceable as liquidated damages. However, the Supreme Court later reversed this decision, deeming the approximately $1.4 million late fee unreasonable and unenforceable as a penalty1.
This case highlights the delicate balance between enforcing contractual terms and ensuring fairness in commercial transactions
efficient breach
case doughty v idaho potatoe
In the case of Doughty v. Idaho Frozen Foods Corp., the dispute centered around the enforceability of a contract for the purchase of potatoes. Here are the key details:
Parties Involved:
Gerald Doughty: A farmer who contracted to sell a portion of his anticipated potato crop.
Idaho Frozen Foods (IFF): A processor of potato products.
Background:
In 1983, Doughty entered into a contract with IFF to sell part of his expected potato crop. The purpose was to secure financing for growing the crop.
The contract utilized a “form” contract developed through negotiations between IFF and the Potato Growers of Idaho (PGI).
Under the contract terms:
Doughty would receive a base price if the potato crop contained a certain percentage of potatoes weighing ten ounces or more.
The price would increase if the crop had a higher percentage of ten-ounce potatoes.
Conversely, the price would decrease if the crop contained a lesser percentage of ten-ounce potatoes.
IFF had the option to refuse or accept delivery of the potatoes based on their size requirements.
Doughty did not have the same option.
Legal Issues Raised by Doughty:
Lack of Mutual Obligation: Doughty argued that the contract lacked mutual obligation.
Unconscionability: He also claimed that the contract was unconscionable.
Court Ruling:
The district court ruled in favor of IFF, holding that the contract was enforceable.
Doughty appealed, but the Idaho Court of Appeals affirmed the district court’s judgment.
The court found that the contract was valid and enforceable, despite Doughty’s objections.
In summary, the case underscores the delicate balance between contractual terms and fairness in commercial transactions
schneberger v apache
parties agree on a specific recovery but don’t anticipate how much it will cost one party backs out and the court sides with the party backing out
case
In the case of Doughty v. Idaho Frozen Foods Corp., the dispute centered around the enforceability of a contract for the purchase of potatoes. Here are the key details:
Parties Involved:
Gerald Doughty: A farmer who contracted to sell a portion of his anticipated potato crop.
Idaho Frozen Foods (IFF): A processor of potato products.
Background:
In 1983, Doughty entered into a contract with IFF to sell part of his expected potato crop. The purpose was to secure financing for growing the crop.
The contract utilized a “form” contract developed through negotiations between IFF and the Potato Growers of Idaho (PGI).
Under the contract terms:
Doughty would receive a base price if the potato crop contained a certain percentage of potatoes weighing ten ounces or more.
The price would increase if the crop had a higher percentage of ten-ounce potatoes.
Conversely, the price would decrease if the crop contained a lesser percentage of ten-ounce potatoes.
IFF had the option to refuse or accept delivery of the potatoes based on their size requirements.
Doughty did not have the same option.
Legal Issues Raised by Doughty:
Lack of Mutual Obligation: Doughty argued that the contract lacked mutual obligation.
Unconscionability: He also claimed that the contract was unconscionable.
Court Ruling:
The district court ruled in favor of IFF, holding that the contract was enforceable.
Doughty appealed, but the Idaho Court of Appeals affirmed the district court’s judgment.
The court found that the contract was valid and enforceable, despite Doughty’s objections.
In summary, the case underscores the delicate balance between contractual terms and fairness in commercial transactions12.
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scneberger v apache
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In the Schneberger v. Apache Corp. case, the dispute centered around a settlement agreement related to water pollution caused by oil and gas drilling operations on the property owned by plaintiffs, Fred and Zola Schneberger. Here are the key details:
Background:
The Schnebergers owned a 154.95-acre tract of land in Washita County, Oklahoma.
Apache Corporation (Apache) commenced drilling an oil and gas well known as the “Schneberger 1-17” on their property in 1982.
The drilling activities led to contamination of the Schnebergers’ water supply.
Legal Action:
In 1984, the Schnebergers filed a complaint in the United States District Court for the Western District of Oklahoma against Apache.
They alleged that Apache had polluted their property with harmful substances due to drilling and operation of the Schneberger 1-17 well, resulting in property and personal damages12.
Settlement Agreement:
During the legal proceedings, the parties reached a settlement.
Apache agreed to reduce contaminants in the water supply to a stipulated level.
Certified Questions:
The United States District Court certified the following questions to the Oklahoma Supreme Court:
What is the measure of damages under Oklahoma law for breach of a settlement agreement to reduce water pollutants caused by oil and gas drilling operations?
If the measure of damages is the plaintiffs’ cost of remediation, can the jury consider a remediation plan different from that approved by the Oklahoma Corporation Commission (which had jurisdiction over the clean-up operations)?1.
Court Ruling:
The Oklahoma Supreme Court held:
The diminution in value of the property is the maximum measure of damages for breach of a settlement agreement to reduce water pollutants.
The cost of remediation is not the proper measure of damages.
The court did not address whether a jury could consider a different remediation plan from the one approved by the Corporation Commission1.
In summary, the case emphasizes the importance of balancing environmental concerns with contractual obligations in the context of oil and gas operations
lyon v belovsky
econmically efficient valuetakes a backseat to what the plaintiff actually asked for
case
n the Lyon v. Belosky Construction, Inc. case, the dispute arose from a construction contract. Here are the key details:
Parties Involved:
Mary C. Lyon: The plaintiff who entered into a contract with Belosky Construction, Inc. (Belosky) for the construction of a custom home in Elmira, Chemung County, New York.
Belosky Construction, Inc.: The defendant responsible for building the custom home.
Contract Details:
In October 1993, Lyon and her sister, Martha Clute, contracted with Belosky for the construction.
The base cost of the home was $247,000, with approximately $42,000 in additional features.
Breach of Contract:
Lyon alleged that Belosky failed to construct the home according to specific design drawings.
After completion, Lyon discovered issues, including a roof that did not comply with the drawings.
Damages Award:
The Supreme Court of New York granted judgment in favor of Lyon.
The court awarded Lyon the amount necessary to bring the roof in compliance with the drawings, which totaled $73,182.66.
Measure of Damages:
The proper measure for damages in breach of a construction contract is the difference between the amount owed on the contract and the cost to complete the job or the difference between the amount owed and the cost to replace the defective construction.
The damages award was deemed reasonable, even though Belosky had substantially performed.
In summary, Lyon prevailed in her breach of contract claim, and the court upheld the damages awarded for rectifying the defective construction.
Specific performance
enforceable contract
requesting partyhas complied with all contractual obligations
there is no adequate remedy in monetary damages
the term itself is suspectiable to specific instructions on performance
the balance of equities favors the requesting party
