Equitable Lumber Corp. v. IPA Land Development Corp.

381 N.Y.S.2d 459 (1976)

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Equitable Lumber Corp. v. IPA Land Development Corp.

New York Court of Appeals
381 N.Y.S.2d 459 (1976)

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  • Written by Rich Walter, JD

Facts

Equitable Lumber Corporation (plaintiff) entered into a sales contract with the president of IPA Land Development Corporation (defendant). The president was also an experienced New York lawyer. The contract’s liquidated-damages clause stipulated, in italics, that if IPA defaulted on payments, IPA would pay damages equal to 30 percent of whatever a collections attorney managed to recover on Equitable’s behalf. IPA breached the contract, and Equitable successfully sued it for damages. However, the trial judge ruled that an unmodified award of liquidated damages would be disproportionate given the minimal work Equitable’s attorney actually performed. The judge lowered the damages award from 30 to 11 percent. On appeal, an intermediate court raised that amount somewhat but otherwise affirmed the trial court. Equitable appealed to the New York Court of Appeals.

Rule of Law

Issue

Holding and Reasoning (Gabrielli, J.)

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Casebooks

Contracts

Key Terms

  • UnconscionabilityA determination that a contractual term was so procedurally or substantively unfair and offensive that the harmed party should be relieved from its consequences.
  • Liquidated DamagesAlso known as stipulated damages, an amount of damages expressly provided for by contract that is intended to represent the parties’ reasonable estimation of damages in the event of a breach. Liquidated damages may also be prescribed by statute.
  • UCC § 2-718A provision of the Uniform Commercial Code that covers liquidation and limitation of damages and deposits.
  • RemitA form of remand, in which a higher court returns the case to a lower court with instructions to make specific further findings.

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