Hammond v. Miller; Brown-Olsen v. Hammond
Liquidated damages are appropriate if: 1.) damages are uncertain in amount or difficult to prove; 2.) the parties possess the intent to agree to liquidated damages; and 3.) the amount of damages is reasonable and is not greatly disproportionate to the amount of damages sustained as a result of breach of contract. In April 2010, the defendants allegedly signed a residential real estate agreement to purchase the plaintiff's residence for $4.4 million and paid a $440,850 deposit. One of the defendants, Alexander Miller, worked as chief executive officer at Daymon Worldwide. Miller was discharged on May 20 and signed a severance contract that provided for payment of $11.3 million. He also received $1.6 million in cash for his stock. The defendants, whose assets exceeded $19 million, decided not to purchase the plaintiff's residence. They went away on a 10-day safari to Africa. The plaintiff was forced to wait for their return to obtain a letter of repudiation and place the property back on the market. Another potential buyer did not provide a binder agreement or a deposit. The plaintiff sued, and the defendants argued that the liquidated damages clause was not enforceable, because the plaintiff's damages were substantially less than $440,850. The court found that the liquidated damages clause clearly and unequivocally indicated that if the defendants were unwilling to perform, regardless of the reason, the liquidated damages provisions applied. The defendants knew that they did not need a mortgage to purchase the property and, even if they did, that a bank would approve the mortgage. The defendants did not promptly sign the letter of repudiation, which prevented the plaintiff from immediately placing the property back on the market. The plaintiff was unable to sell the property. The defendants' breach was willful, and the plaintiff's damages were greater than the amount of liquidated damages. A third party who expressed interest in the property was not ready, willing and able to perform, and the defendants did not prove the plaintiff failed to mitigate damages. The court found that the defendants were not entitled to recover any portion of the $440,850 deposit.