requires a contrary presumption; a promisee has a recognizable utility in certain in terrorem provisions and this utility is frequently reflected in willingness to pay a price for such clauses. Charles J. Goetz & Robert E. Scott, Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach, 77 Colum. L. Rev. 554, 559-62 (1977). 5.2.2 Discussion of C & H Sugar Co. v. Sun Ship and Lake River What factors lead Noonan to enforce the liquidated damages clause against Sun Ship? Can you develop an argument that would raise doubt about whether the contractually specified damages were a reasonable estimate of the losses that C & H Sugar would be likely to suffer from breach? In this connection, consider what damages the company recovers when either Halter or Sun Ship breaches as compared to the damages recoverable when both suppliers breach. Notice that Goetz and Scott claim in a footnote that cases “many have held that actual loss is irrelevant except as it permits inferences concerning the reasonableness of the agreements viewed ex ante.” Is C & H Sugar one of those cases? How does the court use the evidence of actual losses in analyzing the parties’ liquidated damages clauses? How about Lake River? Does Judge Posner approach the question from an ex ante or ex post perspective? Can you identify the policy basis for courts’ reluctance to enforce liquidated damages clauses? The End
requires a contrary presumption; a promisee has a recognizable utility in certain in terrorem provisions and this utility is frequently reflected in willingness to pay a price for such clauses. Charles J. Goetz & Robert E. Scott, Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach, 77 Colum. L. Rev. 554, 559-62 (1977). 5.2.2 Discussion of C & H Sugar Co. v. Sun Ship and Lake River What factors lead Noonan to enforce the liquidated damages clause against Sun Ship? Can you develop an argument that would raise doubt about whether the contractually specified damages were a reasonable estimate of the losses that C & H Sugar would be likely to suffer from breach? In this connection, consider what damages the company recovers when either Halter or Sun Ship breaches as compared to the damages recoverable when both suppliers breach. Notice that Goetz and Scott claim in a footnote that “many cases have held that actual loss is irrelevant except as it permits inferences concerning the reasonableness of the agreements viewed ex ante.” Is C & H Sugar one of those cases? How does the court use the evidence of actual losses in analyzing the parties’ liquidated damages clauses? How about Lake River? Does Judge Posner approach the question from an ex ante or ex post perspective? Can you identify the policy basis for courts’ reluctance to enforce liquidated damages clauses? The End