Q: How can I tell if a liquidated damages clause might be unenforceable?
If a party breaches your New York contract, a liquidated damages clause in a contract can limit the amount that you are entitled to recover. This can cause a substantial financial hardship to the nonbreaching party. Liquidated damages clauses are enforceable in New York; however, in certain circumstances they may be deemed a “penalty” and are then voidable. Penalties for a breach of contract are not enforceable under New York contract law. If you are a party to a contract that contains a liquidated damages clause and the other party has committed a breach, contact an experienced New York business litigation lawyer today for help protecting your legal rights.
The enforceability of a liquidated damages clause is made by the court on a case-by-case basis. If the following factors are in your favor, however, the clause may voidable:
- The amount called for in the liquidated damages clause is grossly disproportionate to the actual or estimated damages that you have incurred
- The amount of loss can easily be estimated
An experienced attorney will review your agreement and help make a determination as to whether the liquidated damages clause is worth challenging. The burden falls on the party seeking to have the liquidated damages clause voided to prove that it is actually an unenforceable penalty. It is therefore essential that you have an experienced legal professional in your corner.
To learn more about liquidated damages following a breach of contract, contact an experienced New York breach of contract attorney today. Call our office at (888) 497-3410 for a consultation.