Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc.
New York Court of Appeals
361 N.E.2d 1015 (1977)
- Written by Angela Patrick, JD
Facts
Puritan Farms 2nd, Inc. (Puritan) (defendant) was a home-milk-delivery service. Puritan negotiated with Truck Rent-A-Center, Inc. (Rent-A-Center) (plaintiff) to lease 25 delivery trucks. Under the parties’ agreement, Rent-A-Center would buy new trucks that were specifically modified for milk delivery for Puritan to use. Rent-A-Center would handle the trucks’ repairs and maintenance. In exchange, Puritan would pay a weekly rental fee for the next seven years. The lease acknowledged that Rent-A-Center was making an upfront investment in the truck fleet. If Puritan breached the lease, Rent-A-Center might not be able to readily lease or sell the trucks to someone else and could lose some or most of its investment. However, Rent-A-Center might be able to eventually lease or sell the trucks to someone else, offsetting losses from a breach. Taking these factors into account, the parties agreed that if Puritan breached the lease, Rent-A-Center could likely recover about half the lost rental income. Based on these calculations, the parties agreed to a liquidated-damages provision in the lease. Under this provision, if Puritan breached the agreement, Rent-A-Center would be entitled to 50 percent of the rent that would have been due for the remainder of the lease term. Three years into the seven-year lease term, Puritan stopped making payments, claiming that Rent-A-Center had breached the lease. Rent-A-Center sued Puritan in New York state court to enforce the liquidated-damages provision. At a nonjury trial, Rent-A-Center’s president testified that, because the home-milk-delivery business was declining, the company had not been able to resell or re-rent most of the trucks. The trial court found that Puritan was the party that had breached the lease. The court also found that the liquidated-damages provision was enforceable and awarded Rent-A-Center $88,677.60 in liquidated damages, which was approximately half of the rents due for the remaining lease term. New York’s appellate division affirmed. Puritan appealed to the New York Court of Appeals.
Rule of Law
Issue
Holding and Reasoning (Jasen, J.)
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