Contracts

Fact pattern

In January, Florist called Refrigeration Tech for a consultation regarding the cool room where Florist stored flowers before arranging them into bouquets, centerpieces, and other items. Florist believed that his current cool room would not be large enough to store flowers for all the customers who would likely contact him to order Valentine’s Day bouquets. Florist was thus hoping to double the size of his storage facility. The construction aspect was already completed, as all that was required to gain the desired space was to knock down a wall and join two rooms together. The more complex aspect was Florist’s need to modify the cooling unit to cover a room twice as large as before. It was crucial that the cool room be maintained with steady temperature and humidity so that the stored flowers had as long of a lifespan as possible. 

Florist asked if Refrigeration Tech would be able to modify his existing cooling unit so that it performed cooling and humidity maintenance as before, but for a space twice as big. Florist also explained that it was crucial that the work be finished by February 7. In preparation for Valentine’s Day, Florist had already placed orders for bulk flowers totaling $2,000. The bulk flowers were scheduled to arrive February 8, giving Florist time to prepare for Valentine’s Day deliveries. Without a functioning cool room to store those flowers, Florist told Refrigeration Tech, he would lose his inventory and be unable to fulfill the Valentine’s Day orders. 

Florist also told Refrigeration Tech that his typical customer first came to him for a special occasion like Valentine’s Day, and after being pleased with one bouquet, would return for birthdays, anniversaries, and any other occasion requiring flowers. Failing to promptly deliver Valentine’s Day flowers would thus not only lose him all the revenue he would typically earn for that holiday, but would severely negatively affect his customer base going forward. 

Refrigeration Tech assured Florist that Refrigeration Tech could perform the work as requested by February 7. The two agreed upon and signed the following contract:

Refrigeration Tech will perform all necessary work upon Florist’s cooling unit to maintain the temperature and humidity in his renovated cool room. Florist will pay Refrigeration Tech $2,500 for this work, provided that Refrigeration Tech delivers a functioning cooling unit on or before February 7. Failure to deliver a functioning cooling unit by that date will trigger liquidated damages of $5,000.

Refrigeration Tech promptly began work on Florist’s cooling unit, but had stretched himself too thin with other jobs and was unable to complete his modifications until February 12. Florist allowed Refrigeration Tech to complete his work, but while Refrigeration Tech worked on the cooling unit, the unit was not operational. In the absence of a functioning cooling unit, all Florist’s bulk flower orders wilted and died well before Valentine’s Day. Florist was thus unable to fill his contracts on Valentine’s Day, on which he would have profited $2,500. 

Florist has refused to pay Refrigeration Tech the $2,500 price agreed to in the contract. Florist has sued Refrigeration Tech for breach of contract, asking for $5,000 in liquidated damages as stipulated in the contract. In response, Refrigeration Tech argued that he still performed the requested work and should receive some payment. Refrigeration Tech also claimed that the $5,000 liquidated damages amount was excessive.

Questions

1. How will the court analyze the liquidated damages clause? Explain.
2. How will Refrigeration Tech argue that he should be paid for his work to the cooling unit, even though he finished after the specified deadline? Is his argument likely to succeed? Explain.