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Liquidated-damages clauses are presumed valid in California commercial contracts

I’ll bet a lot of lawyers don’t know that in California, liquidated-damages clauses in commercial contracts are presumed valid:

In 1977, the Legislature revised section 1671 by deleting the presumption that a liquidated damages clause in a commercial context is invalid, and replaced it with a presumption of validity. … As revised, section 1671, subdivision (b), now provides: “[A] provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.”

El Centro Mall, LLC v. Payless Shoesource, Inc.,No. G040038, slip. op. at 5 (Cal. App. [Fourth Distr.] Apr. 21, 2009) (affirming trial court’s award of liquidated damages) (citation omitted). The appeals court noted that the plaintiff had put on expert testimony explaining what the liquidated damages were intended to compensate for, and how they represented a reasonable estimate of actual damages. See id. at 7-9.

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