Facts
The case concerns the contractor and Patrick who is the owner over an alleged contract breach on the renovation of a house belonging to the owner. Under the contract, there was a clause stating that the contractor would have to pay a fixed and liquidated damages without proof of loss, a sum equal to 35% of the full contract price and also pay the cost incurred on the attorney and the court cost. The plaintiff sued the contractor for the return of his deposit ($5000) while the defendant counterclaimed for $36,102 and attorney fees. The trial court concluded that the owner had breached the contract but also held that the liquidated-damage clause was an enforceable thus awarded the contractor $1,722. The contractor appealed holding that the trial judge erred on striking down the liquidated damage clause.
Issue
The contractor challenges the invalidation of the liquidated damages claim contending that the loss of profits he incurred was sufficient and uncontradicted. Was the clause that imposed a payment of 35% of the contract value for breach by the owner a valid liquidated-damage clause or a penalty clause?
Law
Going by the references to previous court’s jurisprudence, it was evident they did not speak with one voice on the subject. The main rule was to follow what was included in the contract. However, there was a rule that they followed as given by the references. The court explicated utility of liquidated damage clause in the Vicki Bagley Realty, Inc v. Laufer, 482A.2d 359,367 (D.C.1984). In addition, Morgan v. Psychiatric Inst. of Washington, 692 A.2d 417,426 (D.C.1997) and Hawthorne v. Canavan, 726 A.2d 397,401 (D.C.2000) set a standard that a contractor was not required to prove damages to a degree of mathematical certainty as long as there was some evidence provided that would allow the trier of fact make a judgment that is reasoned out.
Analysis
Freedom of contract is furthered through enforcement of stipulated-damage provisions for as long as they do not clearly disregard the compensation principle. These provisions are appropriate when the parties enter into a contract in which the possible damages are uncertain in amount and cannot be ascertained easily. With this, the court will uphold the clauses unless they are clearly unreasonable. The proof burden is upon the breaching party to demonstrate that the damage clause is disproportionate to the foreseeable damages. In this, the plaintiff did not provide the evidence. The total amount for the contract was $103,148.71. Without contradiction, 2/3 of the contract price represented labor and materials whereas 1/3 represented profit as presented by the contractor. The contractor had consulted from a metropolitan area used for pricing of construction jobs as he established his price. Therefore, the clause was reasonable. The trial court had inappropriately struck the clause down due to the fact that the contractor had failed to introduce evidence from his in-pocket-evidence. Such proof is not a necessity in upholding a clause on liquidated damage.
Conclusion
With the foregoing analysis, the decision by the lower court was reversed in favor of the contractor who had been a defendant in the trial court.
