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sec 1.4 - Contracts Outline CH 1 Sec 4 Contractual Controls...

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Contracts Outline CH 1 Sec 4 Contractual Controls on Damages I. General a. Parties may include in their agreement provisions that limit or fix the amount of damages recoverable in the event of breach b. Its enforceability depends on whether the court finds it to be a valid liquidated damages clause or an attempted penalty c. Courts won’t award if damages are too high, but will if too low (b/c parties can buy insurance) d. Courts sometimes construe certain provisions for liquidated damages clauses because people use them to try to keep themselves our of court e. Reasons against enforcing liquidated damages clauses. i. Parties may not know what they are doing at the time of the signing. ii. Contract damages aim at compensation not penalty iii. Courts do not like unjust results. f. Reasons for enforcing liquidated damages i. The parties to a contract know better, or should know better, what is in the contract. ii. A party can claim it is a penalty and it would then be void, but they would have to prove this claim. II. Liquidated Damages Clause- Common Law a. Liquidated damages- a reasonable estimate of an incalculable sum b. Three criteria for enforceability: i. Reasonable forecast of likely damages ii. Expected damages incapable of being estimated iii. Not a penalty for forfeiture c.
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