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


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.


Whether a modern court should refuse to enforce a penalty clause where the signatory is a substantial corporation, well able to avoid improvident commitments.


Held for Defendant.


Although Plaintiff is entitled to damages, the liquidated damages clause is unreasonable in that it is disproportionate to the actual loss.


Damages = contract price - amount saved by non-shipment.