B-Sharp Musical Productions, Inc. v. Haber
27 Misc.3d 41, 899 NYS2d 792 (2010)
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Rule of Law:
A liquidated damages clause is enforceable, and not an impermissible penalty, when the amount stipulated is a reasonable pre-estimate of the probable loss from a breach and the actual damages were difficult to ascertain at the time the contract was formed.
Facts:
- Plaintiff Ariel Entertainment Group, Inc. and defendant James Haber entered into a contract.
- The contract stipulated that Ariel Entertainment would provide a 16-piece band for the bar mitzvah of Haber's son on a specified date for approximately $30,000.
- The contract contained a liquidated damages clause stating that if Haber cancelled in writing within 90 days of the event, the full remaining balance would be immediately due and payable.
- Less than 90 days prior to the scheduled bar mitzvah, James Haber sent a letter to Ariel Entertainment cancelling the contract.
- Haber refused Ariel Entertainment's demand to pay the remaining balance due under the contract, which was approximately $25,000.
Procedural Posture:
- Plaintiff Ariel Entertainment Group, Inc. commenced an action in Civil Court against defendants James Haber and Jill S. Haber.
- Plaintiff moved for summary judgment on its cause of action to enforce the liquidated damages clause.
- Defendants filed a cross-motion for partial summary judgment to dismiss the liquidated damages claim and to dismiss the complaint entirely as against defendant Jill S. Haber.
- The Civil Court (trial court) granted plaintiff's motion for summary judgment and denied defendants' cross-motion.
- Defendants, as appellants, appealed the Civil Court's order to the appellate court.
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Issue:
Is a liquidated damages clause in a performance contract, which requires payment of the full remaining balance for a cancellation made within 90 days of the engagement, an enforceable provision rather than an unenforceable penalty?
Opinions:
Majority - Per Curiam
Yes. The subject provision of the contract is an enforceable liquidated damages clause, not an unenforceable penalty. The court reasoned that given the nature of the contract, the clause represented a reasonable estimate of the plaintiff's probable loss in the event of a cancellation. As the date of the performance approached, the expense of re-booking would increase and the possibility of securing a new engagement would decrease, making the actual damages difficult to ascertain. The court also held that the defendants failed to raise a triable issue of fact regarding their claim that the clause violated a statutory type-size requirement, as their evidence was insufficient. Finally, the complaint against Mrs. Haber was dismissed because a marital relationship alone does not create an agency relationship, and she did not sign the contract.
Analysis:
This decision reinforces the long-standing principle in New York that liquidated damages clauses are upheld when they represent a genuine, bargained-for-estimate of potential damages rather than a penalty intended to compel performance. It highlights that for service and entertainment contracts, the timing of a breach is a critical factor in assessing the reasonableness of the stipulated damages, as the ability to mitigate diminishes significantly as the performance date nears. The case serves as a practical example of the evidentiary burden a party faces when challenging a contract on technical grounds, such as font size regulations, requiring precise proof rather than mere copies.
