10. JRC Trading Corp URC) bought computer software and hardware from Progressive

Question

10. JRC Trading Corp URC) bought computer software and hardware from Progressive Data Systems (PDS) for $167,935, which it full, to track movement of its trucks with inventory and to process transactions. The purchase agreement also called for a $7,500 year licensing fee for an 18-year period, and it stated that in the event of default PDS could "accelerate and declare all obligations of Customer as a liquidated sum." A dispute arose between the parties, and when the case was litigated the only actual contract charges owed PDS were the license fees of $7,500 for two years The application of the liquidated damages clause would yield an additional $120,000 cash for PDS for the future fees for 16 years without any reduction for expenses or the present cash value for the not-yet-earned fees. JRC contends that actual damages were clearly ascertainable and that the liquidated damages clause was a penalty provision that should not be enforced. Progressive argued that the court must interpret the contract as written, stating that the court has no power to

Explanation / Answer

The amount for the damage liquidation of $120,000 is excessive and is calculated as 16 years of licensing fee. In Addition, based on the facts, the actual damages are clearly ascertainable. To conclude, this liquidated damage clause is not valid. JRCshould pay based on the calculated damages to remedy the aggrieved party.

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