Liquidated Damages Defense

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An argument that has succeeded in avoiding an otherwise valid liquidated damages clause is where the liquidated damages amount “shocks the conscience” of the court.  In other words, if the stipulated sum is simply too great in comparison to the contract value itself, then the liquidated damages will not be enforced.  This analysis compares the stipulated sum with the contract value.  For example, in Hook v. Bomar, 320 F.2d 536 (5th Cir. 1968), the loss of a $30,000 deposit on a $95,000 contract was found unconscionable, and the liquidated damages provision was not enforced.

Trenton H. Cotney
Florida Bar Certified in Construction Law
Glenn Rasmussen Fogarty & Hooker, P.A.
100 S. Ashley Dr., Suite 1300
Tampa, FL 33602
(813) 229-3333
http://www.glennrasmussen.com

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