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When "Liquidated Damages" Are Not—The Common Law's Abhorrence of Penalties and What You May or May Not Be Able to Do About It | Weil, Gotshal & Manges LLP


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As a general rule, courts do not save sophisticated parties from bad deals; instead, courts enforce both good deals and bad deals between sophisticated parties according to the express terms set forth in a written contract.
[1] New York is particularly prone to upholding these freedom of contract principles because freedom of contract avoids “judicial upending of the balance struck at the conclusion of the parties’ negotiations,” as well as “promotes certainty and predictability and respects the autonomy of commercial parties in ordering their own business arrangements.”
[2] But most general rules have their exceptions. And a recent decision by New York’s highest court, ....

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