The Negotiation and Drafting of International Contracts Course of Mr. Robert Simpson
TRUCK RENT‑A‑CENTER, INC. v. PURITAN FARMS 2ND, INC
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- OSTEEN v. JOHNSON Colorado Court of Appeals 473 P.2d 184 (1970) Similarly
| TRUCK RENT‑A‑CENTER, INC. v. PURITAN FARMS 2ND, INC.
Court of Appeals of New York 41 N.Y.2d 420,393 N.Y.S.2d 365, 361 N.E.2d 1015 (1977) JASEN, Judge.
The principal issue on this appeal is whether a provision in a truck lease agreement which requires the payment of a specified amount of money to the lessor in the event of the lessee's breach is an enforceable liquidated damages clause, or, instead, provides for an unenforceable penalty. Defendant Puritan Farms 2nd, Inc. (Puritan), was in the business of furnishing milk and milk products to customers through home delivery. In January, 1969, Puritan leased a fleet of 25 new milk delivery trucks from plaintiff Truck Rent‑A‑Center for a term of seven years commencing January 15, 1970. Under the provisions of a truck lease and service agreement entered into by the parties, the plaintiff was to supply the trucks and make all necessary repairs. Puritan was to pay an agreed upon weekly rental fee. It was understood that the lessor would finance the purchase of the trucks through a bank, paying the prime rate of interest on the date of the loan plus 2%. The rental charges on the trucks were to be adjusted in the event of a fluctuation in the interest rate above or below specified levels. The lessee was granted the right to purchase the trucks, at any time after 12 months following commencement of the lease, by paying to the lessor the amount then due and owing on the bank loan, plus an additional $100 per truck purchased. Article 16 of the lease agreement provided that if the agreement should terminate prior to expiration of the term of the lease as a result of the lessee's breach, the lessor would be entitled to damages, "liquidated for all purposes", in the amount of all rentals that would have come due from the date of termination to the date of normal expiration of the term less the "re‑rental value" of the vehicles, which was set at 50% of the rentals that would have become due. In effect, the lessee would be obligated to pay the lessor, as a consequence of breach, one half of all rentals that would have become due had the agreement run its full course. The agreement recited that, in arriving at the settled amount of damage, "the parties hereto have considered among other factors, Lessor's substantial initial investment in purchasing or reconditioning for Lessee's service the demised motor vehicles, the uncertainty of Lessor's ability to re‑rent the said vehicles, the costs to Lessor during any period the vehicles may remain idle until re‑rented, or if sold, the uncertainty of the sales price arid its possible attendant loss. The parties have also considered, among other factors, in so liquidating the said damages, Lessor's saving in expenditures for gasoline, oil and other service items." Puritan tendered plaintiff a security deposit, consisting of four weeks' rent and the lease went into effect. After nearly three years, the lessee sought to terminate the lease agreement. On December 7, 1973, Puritan wrote to the lessor complaining that the lessor had not repaired and maintained the trucks as provided in the lease agreement. Puritan stated that it had "repeatedly notified" plaintiff of these defaults, but plaintiff had not cured them. Puritan, therefore, exercised its right to terminate the agreement 'without any penalty and without purchasing the trucks". (Emphasis added.) On the date set for termination, December 14, 1973, plaintiff's attorneys replied to Puritan by letter to advise it that plaintiff believed it had fully performed its obligations under the lease and, in the event Puritan adhered to the announced breach, would commence proceedings to obtain the liquidated damages provided for in article 16 of the agreement. Nevertheless, Puritan had its drivers return the trucks to plaintiff's premises, where the bulk of them have remained ever since. At the time of the termination, plaintiff owed $45,134.17 on the outstanding bank loan. Plaintiff followed through on its promise to commence an action for the payment of the liquidated damages. Defendant counterclaimed for the return of its security deposit. At the close of the trial, the court found, based on the evidence it found to be credible, that plaintiff had substantially performed its obligations under the lease and that defendant was not justified in terminating the agreement. Further, the court held that the provision for liquidated damages was reasonable and represented a fair estimate of actual damages which would be difficult to ascertain precisely. The primary issue before us is whether the "liquidated damages" provision is enforceable. Liquidated damages constitute compensation which, the parties have agreed, should be paid in order to satisfy any loss or injury flowing from a breach of their contract. (Wirth & Hamid Fair Booking v. Wirth, 265 N.Y. 214, 223, 192 N.E. 297, 301.) In effect, a liquidated damage provision is an estimate, made by the parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of breach of the agreement. (5 Williston, Contracts [3d ed.], § 776. p.668.) Parties to a contract have the right to agree to such clauses, provided that the clause is neither unconscionable nor contrary to public policy. (Mosler Safe Co. v. Maiden Lane Safe Deposit Co., 199 N.Y. 479, 485, 93 N.E. 81, 83.) Provisions for liquidated damage have value in those situations where it would be difficult, if not actually impossible, to calculate the amount of actual damage. In such cases, the contracting parties may agree between themselves as to the amount of damages to be paid upon breach rather than leaving that amount to the calculation of a court or jury. (14 N.Y.Jur., Damages. § 155, pp. 4‑5.) On the other hand, liquidated damage provisions will not be enforced if it is against public policy to do so and public policy is firmly set against the imposition of penalties or forfeitures for which there is no statutory authority. (City of Rye v. Public Serv. Mat. Ins. Co., 34 N.Y.2d 470, 472‑473. 358 N.Y.S.2d 391. 392393, 315 N.E.2d 458, 359.) It is plain that a provision which requires, in the event of contractual breach, the payment of a sum of money grossly disproportionate to the amount of actual damages provides for penalty and is unenforceable. A liquidated damage provision has its basis in the principle of just compensation for loss. (Cf. Restatement. Contracts, § 339, and Comment thereon.) A clause which provides for an amount plainly disproportionate to real damage is not intended to provide fair compensation but to secure performance by the compulsion of the very disproportion. A promisor would be compelled, out of fear of economic devastation, to continue performance and his promisee, in the event of default, would reap a windfall well above actual harm sustained. The rule is now well established. 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. In interpreting a provision fixing damages, it is not material whether the parties themselves have chosen to call the provision one for 'liquidated damages", as in this case, or have styled it as a penalty. Such an approach would put too much faith in form and too little in substance. DUFFORD, Judge.
This was an action for breach of an oral contract. Trial was to the court, which found that the plaintiffs had paid the sum of $2.500. In exchange, the defendant had agreed to "promote" the plaintiff's daughter, Linda Osteen, as a singer and composer of OSTEEN v. JOHNSON Colorado Court of Appeals 473 P.2d 184 (1970) Similarly, the agreement should be interpreted as of the date of its making and not as of the date of its breach. In applying these principles to the case before us, we conclude that the amount stipulated by the parties as damages bears a reasonable relation to the amount of probable actual harm and is not a penalty. Hence, the provision is enforceable and the order of the Appellate Division should be affirmed. Looking forward from the date of the lease, the parties could reasonably conclude, as they did, that there might not be an actual market for the sale or re‑rental of these specialized vehicles in the event of the lessee's breach. To be sure, plaintiff's lost profit could readily be measured by the amount of the weekly rental fee. However, it was permissible for the parties, in advance, to agree that the re‑rental or sale value of the vehicles would be 50% of the weekly rental. Since there was uncertainty as to whether the trucks could be re‑rented or sold, the parties could reasonably set, as they did, the value of such mitigation at 50% of the amount the lessee was obligated to pay for rental of the trucks. This would take into consideration the fact that, after being used by the lessee, the vehicles would no longer be "shiny, new trucks", but would he used, possibly battered trucks, whose value would have declined appreciably. The parties also considered the fact that, although plaintiff, in the event of Puritan's breach, might be spared repair and maintenance costs necessitated by Puritan's use of the trucks, plaintiff would have to assume the cost of storing them and maintaining trucks idled by Puritan's refusal to use them. Further, it was by no means certain, at the time of the contract, that lessee would peacefully return the trucks to the lessor after lessee had breached the contract. We attach no significance to the fact that the liquidated damages clause appears on the preprinted form portion of the agreement. The agreement was fully negotiated and the provisions of the form, in many other respects, were amended. There is no indication of any disparity of bargaining power or of unconscionability. The provision for liquidated damages related reasonably to potential harm that was difficult to estimate and did not constitute a disguised penalty. Accordingly, the order of the Appellate Division should be affirmed, with costs,
country‑western music. More specifically, it was found that the defendant had agreed to advertise Linda through mailings or a period of one year: to arrange and furnish the facilities necessary for Linda to record several songs: to prepare two records from the songs recorded: to press and mail copies of one of the records to disc jockeys throughout the country: and, if the first record met
with any success, to press and mail out copies of the second record. The trial court further found that the defendant did arrange for several recording sessions, at which Linda recorded four songs. A record was prepared of two of the songs, and 1,000 copies of the record were then pressed. Of the pressed records, 340 copies were mailed to disc jockeys, 200 were sent to the plaintiffs, and the remainder were retained by the defendant. Various mailings were made to advertise Linda; flyers were sent to disc jockeys throughout the country; and Linda's professional name was advertised in trade magazines. The record sent out received a favorable review and a high rating in a trade magazine. Upon such findings the trial court concluded that the defendant had substantially performed the agreement. However, a judgment was entered in favor of the plaintiffs in the sum of $1.00 and costs on the basis that the defendant had wrongfully caused the name of another party to appear on the label of the record as co‑author of a song which had been written solely by Linda. The trial court also ordered the defendant to deliver to the plaintiffs certain master tapes and records in the defendant's possession. 1. Right of Restitution
Although plaintiff's reasons are not clearly defined, they argue here that the award of damages is inadequate, and that the trial court erred in concluding that the defendant had substantially performed the agreement. However, no evidence was presented during the trial of the matter upon which an award of other than nominal damages could be based. In our opinion, the remedy which plaintiffs proved and upon which they can rely is that of restitution. See 5 A. Corbin, Contracts § 996. This remedy is available where there has been a contract breach of vital importance, variously defined as a substantial breach or a breach which goes to the essence of the contract. See 5 A. Corbin, Contracts § 1104, where the author writes: "In the case of a breach by non‑performance, the injured party's alternative remedy by way of restitution depends upon the extent of the non‑performance by the defendant. The defendant's breach may be nothing but a failure to perform some minor part of his contractual duty. Such a minor non‑performance is a breach of contract and an action for damages can be maintained. The injured party, however, cannot maintain for restitution of what he has given the defendant unless the defendant's non‑performance is so material that it is held to go to the 'essence'; it must be such a breach as would discharge the injured party from any further contractual duty on his own part. A minor breach by one party does not discharge the contractual duty of the other party; and the latter being still bound to perform as agreed can not be entitled to the restitution of payments already made by him or to the value of other part performances rendered." 2. Breach of Contract
The essential question here then becomes whether any breach on the part of the defendant is substantial enough to justify the remedy of restitution. Plaintiffs argue that the defendant breached the contract in the following ways: First, the defendant did not promote Linda for a period of one year as agreed; secondly, the defendant wrongfully caused the name of another party to appear on the label as co‑author of the song which had been composed solely by Linda; and thirdly, the defendant failed to press and mail out copies of the second record as agreed. The first argument is not supported by the record. Plaintiffs brought the action within the one‑year period for which the contract was to run. There was no evidence that during this period the defendant had not continued to promote Linda through the use of mailings and advertisements. Quite obviously the mere fact that the one‑year period had not ended prior to the commencement of the action does not justify the conclusion that the defendant had breached the agreement. Plaintiff's second argument overlooks the testimony offered on behalf of the defendant that listing the other party as co‑author of the song would make it more likely that the record would be played by disc jockeys. The plaintiff's third argument does, however, have merit. It is clear from the record and the findings of the trial court that the first record had met with some success. it is also clear that copies of the second record were neither pressed nor mailed out. In our opinion the failure of the defendant to press arid mail out copies of the second record after the first had achieved some success constituted a substantial breach of the contract and, therefore, justifies the remedy of restitution. Seale v. Bates, 145 Cob. 430, 359 P.2d 356; Colorado Management Corp. v. American Founders Life Insurance Co., 145 Cob. 413, 359 P.2d 665; Bridges v. Ingram, 122 Cob. 501, 223 P.2d 1051. Both parties agree that the essence of the contract was to publicize Linda as a singer of western songs and to make her name and talent known to the public. Defendant admitted and asserted that the primary method of achieving this end was to have records pressed and mailed to disc jockeys. 3. Determining Damages
It is clear that the defendant did partially perform the contract and, under applicable law, should be allowed compensation for the reasonable value of his services. See 5 A. Corbin. Contracts § 1114, where the author writes: "[A]l1 courts are in agreement that restitution by the defendant will not be enforced unless the plaintiff returns in some way what he has received as a part performance by the defendant." It shall, therefore, be the ultimate order of this court that prior to restoring to the plaintiffs the $2,500 paid by them to the defendant further proceedings be held during which the trial court shall determine the reasonable value of the services which the defendant rendered on plaintiffs' behalf. The judgment is reversed, and this case is remanded with directions that a new trial be held to determine the one issue of the amount to which the plaintiffs are entitled by way of restitution. Such amount shall be the $2,500 paid by plaintiffs to defendant less the reasonable value of the services which the defendant performed on behalf of plaintiffs. 1 The history of English common law can be divided into four basic periods: prior to 1066 (the Anglo-Saxon period); 1066 (the Norman Conquest of England) to 1485 (the beginning of the Tudor Dynasty); 1485-1800's (the further development of common law and the emergency of equity); and the 1800's to the present (the ascendancy of common law and the Parliament) a. Prior to 1066 Anglo-Saxon period Barbarian tribes. Diverse local laws and customs. Laws and the administration of justice were generally on a local level. The principal documents of the period are the "dooms" of barbarian kings which are only fragments of customary laws of the time. These date from the reign of King Aethelberht (601-604) to King Canute (1020-1034). These early laws, like the kings who legislated, their were strongly influenced by the Christian religion, In promulgating laws, the Kings never acted alone, but sought the counsel and consent of their wise men and relied on custom and tradition. Consider the following excerpts: I, then. King Alfred, have collected these (dooms) and ordered them) to be written down-- (that is to say,) many of those which our predecessors observed and which were also pleasing to me. And those which were not pleasing to me, by the advice of my witan, I have rejected, ordering them to be observed only as amended. I have not ventured to put in writing much of my own, being uncertain what might please those who shall come after us. So I have here collected the dooms that seemed to me the most just, whether they were from the time of Ine, my kinsman, from that of Off a, king of the Mercians, or from that of Aethelberht, the first of the English to receive baptism; the rest I have discarded. I, then, Alfred, king of the West Saxons, have shown these (dooms) to all my witan, who have declared it is the will of all that they be observed. ... - Dooms of Alfred (871-901). King Edward commands to all his reeves: that you deem such right dooms as you know to be most right and as stand in the doombook. Nor for any cause shall you fail to declare the customary law; and (you shall see to it) that a day is set for every cause, when that which you decide concerning it shall be carried out. - Dooms of Edward the Elder (901-924).
- Coronation oath of Edgar (946-963) b. Historical development of common law - 1066 (Norman Conquest of England) to 1485 (the beginning of the Tudor Dynasty) William did not bring any new body of laws to England. Rather, to conciliate his English subjects, one of his first legislative acts was to confirm existing English laws: "This I will and order that all shall have and hold the law of King Edward as to lands and all other things with these additions which I have established for the good of the English people." As concerns the law, the Norman kings never considered themselves depositories of supreme power. Rather, they accepted to maintain the ancient and reasonable customs ("general immemorial customs of the Realm"). One of the principal results of the Norman Conquest was the establishment of feudalism in England. William confiscated almost all the lands of England and gave them to his followers as a reward for their services. William gave the lands subject to terms that had been customarily applied to landholding in Normandy. Under these terms of the "feudal tenure", each holder of land promised to render military and other services (administrative as well as financial) to the king in return for power, including part of the administration of justice, into his own hands. The basic fact of English legal history after 1066 is the creation of a national, efficient and centralized administration of justice. William developed a council of advisors who often acted as a court of justice ("curia regis"). This "King's court" followed its own precedents and thus developed a uniform procedure. Also, it tended to be more impartial than the antiquated local courts. The king's court became popular. Henry I (1100-1135) began sending royal justices around the country to preside over local courts and handle other business of the king. Henry II expanded the jurisdiction of the king's court and made increasing use of the itinerant justices. By the end of the 12th Century, the king's court with its regular circuits became one of the most powerful political institutions in the country. It gave a uniformity to the administration that had never existed under the old local courts. The itinerant justices spread throughout the land knowledge of the one set of legal principles used by the central courts. Eventually, the institutional fact of a unified court system resulted in the growth of a law that was common to all of the realm. New rules and techniques developed gradually during a long period in which the rate of change was relatively slow. Common law system of pleading The original concept was that justice was a commodity dispensed by the king. Someone with a complaint sought permission of the king to sue. This permission was granted for a fee. The factual basis of various complaints tended to be the same or similar. From particular factual situations developed the writs. A writ was an authorization to the central court or to one of the itinerant justices to try the particular case. However, if the actual factual situation varied from the factual situation of the writ issued, the court had no authority to hear the case. Remedies at common law thus developed in terms of available writs and procedural forms. Each time a new writ was issued, new law was created. In addition to the writs, the king's court developed another technique to extend their jurisdiction: a plaintiff was allowed to make a declaration of the facts of his case and to request the judges, in view of the facts, to hear his case. These new actions in which the judges decided to hear the cases were called "actions on the case”. Directory: FACULTY FACULTY -> Dsci 3870: Management Science FACULTY -> Handling Indivisibilities FACULTY -> Course overview FACULTY -> Curriculum vitae wei chen professor FACULTY -> Digital image warping FACULTY -> Samples of Elements Exam Question III contains All Prior Exam Qs III except FACULTY -> 【Education&Working Experience】 FACULTY -> References Abe, M., A. Kitoh and T. Yasunari, 2003: An evolution of the Asian summer monsoon associated with mountain uplift —Simulation with the mri atmosphere-ocean coupled gcm. J. Meteor. Soc. Japan, 81 FACULTY -> Ralph R. Ferraro Chief, Satellite Climate Studies Branch, noaa/nesdis FACULTY -> Unit IV text: Types of Oil, Types of Prices Grammar: that/those of, with revision Download 0.79 Mb. Share with your friends:
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