Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

تمرين 16

B-Sharp Musical Productions, Inc. v. Haber
New York Supreme Court, 27 Misc.3d 41, 899 N.Y.S.2d 792 (2010).
FACTS B-Sharp Musical Productions, Inc., and James Haber entered into a contract under which B-Sharp was to provide a designated sixteen-piece band on a specified date to perform at Haber's son's bar mitzvah. Haber was to pay approximately $30,000 for the band's services. The contract contained a liquidated damages clause stating, "If [the contract] is terminated in writing by [Haber] for any reason within ninety (90) days prior to the engagement, the remaining balance of the contract will be immediately due and payable. If [the contract] is terminated in writing by [Haber] for any reason before the ninety (90) days period, 50% of the balance will be immediately due and payable."
Fewer than ninety days before the date of the bar mitzvah, Haber sent a letter to B-Sharp notifying it that he was canceling the contract. After Haber refused B-Sharp's demand that he pay the remaining amount due under the contract-approximately $25,000-B-Sharp sued Haber and his wife in a New York state court to recover the damages. The court granted B-Sharp's motion for summary judgment, enforcing the liquidated damages clause, and the defendants appealed.
ISSUE Was the liquidated damages clause, which specified the amount to be paid to the band in the event that the performance was cancelled, enforceable?
DECISION Yes. The New York Supreme Court upheld the civil court's judgment. The clause was a reasonable estimate of damages given that B-Sharp most likely would not be able to rebook another performance that close to the contracted performance for the Haber bar mitzvah.
REASON The court determined that the clause in question was "not an unenforceable penalty." The clause used an estimate of B-Sharp's probable loss in the event of a cancellation as the measure of loss. This estimate reflected an understanding that "although the expense and possibility of rebooking a cancelled [performance] could not be ascertained with certainty, as a practical matter, the expense would become greater, and the possibility would be less, the closer to the [performance] the cancellation was made, until a point was reached, [ninety] days before the [performance], that any effort to rebook could not be reasonably expected."
FOR CRITICAL ANALYSIS-Ethical Consideration Why did the court determine that the contract clause at issue provided for enforceable liquidated damages and not for an unenforceable penalty?