Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc.

From wikilawschool.org. Wiki Law School does not provide legal advice. For educational purposes only.
Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc.
Court
Citation 41 N.Y.2d 420, 393 N.Y.S.2d 365, 369, 361 N.E.2d 1015, 1018 (1977)
Date decided

Facts: Defendant leased trucks from Plaintiff. K had a liquidated damages clause. The amount awarded by the clause was more than the remaining value of the lease.

Issue: Is the clause enforceable?

Holding: Held for the Plaintiff. The clause is enforceable.

Rule: "A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. . . . If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced."

If the three conditions are not all satisfied, a liquidated damages clause will not be enforced.

  1. Actual damages are difficult to estimate at the time the K was made.
  2. Liquidated damages are a reasonable estimate of the anticipated loss.
  3. Liquidated damages are not grossly disproportionate to the probable loss (No Punitive Damages)