Summary
The Massachusetts Supreme Judicial Court held that an acceleration clause in a ten-year luxury-seat license agreement was an enforceable liquidated damages provision rather than an unlawful penalty. The court ruled that mitigation was irrelevant once the provision was found enforceable and modified the judgment to award the unpaid license fees of $65,500 plus interest.
Topics
Practice areas
Questions Presented
- Whether the acceleration clause requiring payment of all license fees remaining under the ten-year luxury-seat agreement constituted an enforceable liquidated-damages provision or an unlawful penalty.
- Whether mitigation of damages must be considered when an enforceable liquidated-damages provision fixes the amount due after breach.
Holdings
- The acceleration clause was enforceable because, at the time of contracting, damages from a breach were difficult to ascertain and the accelerated amount was a reasonable forecast of anticipated damages rather than an unlawful penalty.
- When an enforceable liquidated-damages provision fixes a reasonable sum in advance, mitigation is irrelevant and should not be considered in assessing damages.
Key quotations
“A liquidated damages provision will usually be enforced, provided two criteria are satisfied: first, that at the time of contracting the actual damages flowing from a breach were difficult to ascertain; and second, that the sum agreed on as liquidated damages represents a “reasonable forecast of damages expected to occur in the event of a breach.”” (451 Mass. at 420)
“We will follow the rule in many other jurisdictions and hold that, in the case of an enforceable liquidated damages provision, mitigation is irrelevant and should not be considered in assessing damages.” (451 Mass. at 423)
Factual background
NPS, the developer of Gillette Stadium, entered into a ten-year agreement with Paul Minihane for two luxury seats at $3,750 per seat annually for the 2002 through 2011 seasons. The agreement provided that, upon default, the unpaid license fees for the remaining term would be accelerated and immediately due. Minihane paid a security deposit and $2,000 toward the 2002 season, attended nearly all of the relevant games, and then made no further payments. NPS accelerated the balance and sued for the remaining license fees.
Procedural history
Minihane defaulted during the first year of a ten-year luxury-seat license agreement. After NPS accelerated the remaining license fees and sued, the Superior Court held the liquidated-damages provision unenforceable and awarded actual damages of $6,000. The Supreme Judicial Court held the provision enforceable and modified the judgment to award the unpaid license fees due under the agreement, $65,500, plus interest.