Liquidated Damages in Commercial Leases of Personalty-The Proper Analysis

摘要

Most commercial leases of personalty use liquidated damages oj some sort in the event of a lessee default and consequent termination of the lease. V.C.C. Article 2A provides a simple formula for determining when such liquidated damages are enforceable (and do not constitute an unenforceable penalty): the liquidated amount must be a reasonable pre-estimate oj the harm anticipated by the lessor. This Article briefly reviews the role of liquidated damages in leases and then summarizes the Article 2A caselaw on liquidated damages. In the authors' view, a number of courts have not properly applied the Article 2A formula. Finally, this Article provides a methodology for how a liquidated damage clause in a lease should be analyzed under Article 2A. This proposed solution would be both more consistent with the intent of Article 2A and more conducive to a vibrant and efficient leasing industry.