Lake River Corp. v. Carborundum Co.: Difference between revisions
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'''Issue''': | '''Issue''': | ||
Whether a modern court | Whether a modern court should refuse to enforce a penalty clause where the signatory is a substantial corporation, well able to avoid improvident commitments. | ||
Latest revision as of 02:25, February 2, 2020
| Lake River Corp. v. Carborundum Co. | |
| Court | U.S. Court of Appeals, 7th Circuit |
|---|---|
| Citation | 769 F.2d 1284 (7th Cir. 1985) |
| Date decided | 1985 |
Facts:
Plaintiff agreed to build a new bagging system for Defendant under a contract with a liquidated damages clause. Defendant breached, and Plaintiff wanted damages according to the liquidated damages clause.
Issue:
Whether a modern court should refuse to enforce a penalty clause where the signatory is a substantial corporation, well able to avoid improvident commitments.
Holding:
Held for Defendant.
Reasons:
Although Plaintiff is entitled to damages, the liquidated damages clause is unreasonable in that it is disproportionate to the actual loss.
Rule:
Damages = contract price - amount saved by non-shipment.
