In December 1991, NSI contracted to provide laundry service for Secrist\'s nursing home for a three-year period. Secrist used the service until March 1993, when she unilaterally terminated the contract without NSI\'s consent. The written contract provided for liquidated damages in the event of an unlawful termination. The damages were 40 percent of the anticipated gross receipts under the contract for the unexpired term - 30 percent for overhead and 10 percent for profits. NSI sued to collect the liquidated damages. The trial court found the liquidated damages provisions of the contract excessive because they included 30 percent recovery for overhead after 15 months of contract period had been completed. Was the trial court correct in rejecting the overhead portion of the liquidated damages clause as excessive? Why?
Solution
The train court is right as they rejected the overhead portion on the basis of the following laws:
The liqudated potion consists of two parts - overhead and profits. The trial court found only the portion allocated to overhead to be excessive. The court therefore acted properly in enforcing the portion of the liquidated damages provision allocated to profits according to its clear terms, rather than requiring NSI to prove its actual damages in the nature of lost profits.
.
In December 1991- NSI contracted to provide laundry service for Secris.docx
1. In December 1991, NSI contracted to provide laundry service for Secrist's nursing home for a
three-year period. Secrist used the service until March 1993, when she unilaterally terminated the
contract without NSI's consent. The written contract provided for liquidated damages in the
event of an unlawful termination. The damages were 40 percent of the anticipated gross receipts
under the contract for the unexpired term - 30 percent for overhead and 10 percent for profits.
NSI sued to collect the liquidated damages. The trial court found the liquidated damages
provisions of the contract excessive because they included 30 percent recovery for overhead after
15 months of contract period had been completed. Was the trial court correct in rejecting the
overhead portion of the liquidated damages clause as excessive? Why?
Solution
The train court is right as they rejected the overhead portion on the basis of the following laws:
The liqudated potion consists of two parts - overhead and profits. The trial court found only the
portion allocated to overhead to be excessive. The court therefore acted properly in enforcing the
portion of the liquidated damages provision allocated to profits according to its clear terms,
rather than requiring NSI to prove its actual damages in the nature of lost profits.
