Liquidated damages in the event of unlawful termination

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Reference no: EM131082046

In December 1991, NSI contracted to provide laundry service for Secrist's nursing home for a three-year period. Secrist used the service until March 1993, when she unilaterally terminated the contract without NSI's consent. The written contract provided for liquidated damages in the event of an unlawful termination. The damages were 40 percent of the anticipated gross receipts under the contract for the unexpired term - 30 percent for overhead and 10 percent for profits. NSI sued to collect the liquidated damages. The trial court found the liquidated damages provisions of the contract excessive because they included 30 percent recovery for overhead after 15 months of contract period had been completed. Was the trial court correct in rejecting the overhead portion of the liquidated damages clause as excessive? Why?

Reference no: EM131082046

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