Wassenaar v. Towne Hotel

The plaintiff, Wassenaar, was an employee of the defendant, Towne Hotel. The contract Wassenaar and the hotel agreed to provided that should the contract be terminated prior to its expiration date, the Hotel would be responsible for fulfilling the entire financial obligation set forth within the agreement for 3 year. Wassenaar was wrongfully terminated, and 3 months later started working for another hotel. He filed suit for damages amounting to the 21 months left in his 3 year contract with Towne Hotel.

The circuit court entered a judgment in favor of Wassenaar, enforcing the stipulated damages clause and awarding him $24,640 for the full 21 months. The court of appeals reversed, holding the stipulated damages clause unenforceable as a penalty.

Whether a liquidated damages provision contained in the contract of a wrongfully terminated employee is subject to the doctrine of mitigation of damages due to the re-employment of the employee by another employer.

Judgment of the circuit court affirmed.

Where the stipulated damages clause is a valid provision for liquidated damages, the doctrine of mitigation of damages is not applicable to determine the damages awarded the non-breaching party.

The validation of a stipulated damages clause is reasonability under the totality of circumstances, and the employer failed to prove the unreasonableness of such clause.