Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 21

Knutton, owner of a music company, entered into a contract with Cofield, a restaurant owner, in which a jukebox was to be installed in Cofield's restaurant, with the parties sharing the receipts. The contract provided that if Cofield discontinued using the jukebox before the expiration of the contract, Cofield would pay Knutton a sum of money for the unexpired term of the contract based on the average of the amount paid from the time the jukebox had been installed. Prior to the expiration of the contract, Cofield disconnected the jukebox and installed one belonging to another company. Knutton sued for damages for breach of contract. Cofield, however, claimed that the damages being sought were a penalty and not liquidated damages. Was Cofield correct? (Knutton v. Cofield, 273 N.C. 355)