Liquidating damages north carolina
(1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then-anticipated harm caused by the default or other act or omission.(2) If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (1) of this section, or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this Article.(3) If the lessor justifiably withholds or stops delivery of goods because of the lessee’s default or insolvency (G.
25-2A-526), the lessee is entitled to restitution of any amount by which the sum of his payments exceeds:(b) in the absence of those terms, twenty percent (20%) of the then-present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or five hundred dollars (0.00).
This may seem counterintuitive, in that LDs are the sum that a breaching party pays to a non-breaching party, in the event of breach.There does not appear to be any North Carolina ethics opinions or rules that expressly prohibit it.Using such a provision, however, seems to force commercialism into the arrangement and ignores the heart of the attorney-client relationship — a relationship based on duty and trust.NC courts generally give broad deference to parties entering into a contractual relationship to negotiate the terms of the contract, including legal remedies against each other.One type of remedy which may be included is a liquidated damages clause.
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However, the actual purpose is not to “punish” a breaching party but rather to establish, up front, the amount needed to reasonably compensate the non-breaching party for losses which it will likely incur as a result of the breach.