Lake River Corp. v. Carborundum Co.

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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.